Pros and Cons of Currency Board Arrangements in the Lead-Up to EU Accession and Participation in the Euro Zone

Author/Editor:

Anne Marie Gulde ; Juha Kähkönen ; Peter M Keller

Publication Date:

February 1, 2000

Electronic Access:

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Disclaimer: This Policy Dicussion Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Historically, countries with currency board arrangements (CBAs) have experienced lower inflation and higher growth than those with other regimes. The experiences of three candidates for EU membership with CBAs (Estonia, Lithuania, and Bulgaria) have also been generally favorable. Can CBAs serve these transition countries well all the way up to the adoption of the euro? After considering the pros and cons, this paper provides an affirmative answer, but notes that to preserve the viability of their CBAs throughout the process, these countries need to maintain strict policy discipline and be prepared to deal with large capital inflows and asymmetric shocks.

Series:

Policy Discussion Paper No. 2000/001

Subject:

Conventional peg Currency boards Exchange rate arrangements Exchange rates Foreign exchange Inflation Prices

English

Publication Date:

February 1, 2000

ISBN/ISSN:

9781451974928/1564-5193

Stock No:

PPIEA0012000

Pages:

26

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