Dual Currency Boards: A Proposal for Currency Stability

Author/Editor:

S. E Oppers

Publication Date:

December 1, 2000

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working 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:

This paper shows that extending the convertibility guarantee of the traditional currency board to a second reserve currency brings about an automatic, market-driven change of the peg when the initial reserve currency appreciates beyond a specified level. The “dual” currency board thus maintains the advantages of a hard peg, but avoids the economic difficulties associated with the link to an overvalued reserve currency. As an added benefit, the system has the potential to promote global currency stability, with the reserves of the dual currency board country acting as a buffer stock to the exchange cross-rate of the chosen reserve currencies.

Series:

Working Paper No. 2000/199

Subject:

Conventional peg Currencies Currency boards Exchange rates Foreign exchange Money Reserve currencies

English

Publication Date:

December 1, 2000

ISBN/ISSN:

9781451860108/1018-5941

Stock No:

WPIEA1992000

Pages:

22

Please address any questions about this title to publications@imf.org