Currency Boards in Retrospect and Prospect
Holger C. Wolf, Atish R. Ghosh, Helge Berger, and Anne-Marie Gulde
Abstract
Currency boards, more so than other exchange rate regimes, have come in and out of fashion. Defined by a fixed exchange rate with full convertibility, central bank liabilities backed with foreign exchange reserves, and a high cost of exiting the regime, they were common in colonial times—until most were cast off as countries gained independence after World War II. In the 1990s, currency boards enjoyed a revival as the cornerstone of various macroeconomic stabilization programs—including many in central and eastern European transition economies—only to fall into disfavor again with the collapse ... More
Currency boards, more so than other exchange rate regimes, have come in and out of fashion. Defined by a fixed exchange rate with full convertibility, central bank liabilities backed with foreign exchange reserves, and a high cost of exiting the regime, they were common in colonial times—until most were cast off as countries gained independence after World War II. In the 1990s, currency boards enjoyed a revival as the cornerstone of various macroeconomic stabilization programs—including many in central and eastern European transition economies—only to fall into disfavor again with the collapse of the Argentine regime in 2002. This book takes a balanced look at the effects of currency board regimes on inflation, output growth, and macroeconomic performance more generally. Drawing on historical experience, economic theory, cross-country empirical analysis, and case studies of currency boards in Argentina, Estonia, Lithuania, Bulgaria, and Bosnia and Herzegovina, it concludes that currency boards deliver significant reductions in inflation compared to other regimes and do not seem to result in slower growth or a markedly higher vulnerability to crisis.
Keywords:
currency boards,
exchange rate regimes,
fixed exchange rate,
full convertibility,
central bank liabilities,
foreign exchange reserves,
colonial times,
independence,
macroeconomic stabilization,
transition economies
Bibliographic Information
| Print publication date: 2008 |
Print ISBN-13: 9780262232654 |
| Published to MIT Press Scholarship Online: August 2013 |
DOI:10.7551/mitpress/9780262232654.001.0001 |
