Lithuania: History and Future of the Currency Board Arrangement
August 1, 2002
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Summary
The paper examines the evolution of the institutional setup of Lithuania's Currency Board Arrangement (CBA) and competitiveness from 1994 through 2001, with a view to determining the resilience of the Lithuanian CBA to external shocks in 2002-03. First, several indicators of competitiveness are analyzed in the context of productivity gains and flexibility of the labor market and prices are considered. Then, the equilibrium exchange rate and misalignments of the actual rate from it are estimated in a cointegration framework. The paper concludes that, under current policies, the CBA would be able to cope with sizable external shocks during 2002-03 provided supporting policies remain in place.
Subject: Competition, Exchange rates, Financial markets, Foreign exchange, Nominal effective exchange rate, Production, Productivity, Real effective exchange rates
Keywords: appreciation vis-à-vis, cash euro, CBA suits Lithuania, Competition, competitiveness, currency board arrangement, dollar rate, Euro appreciation, euro peg, Exchange rates, export price, financial system, investment portfolio, Nominal effective exchange rate, Productivity, Real effective exchange rate, Real effective exchange rates, reference rate, U.S. dollar, WP
Pages:
35
Volume:
2002
DOI:
Issue:
127
Series:
Working Paper No. 2002/127
Stock No:
WPIEA1272002
ISBN:
9781451854992
ISSN:
1018-5941
