Currency Boards: Issues and Experiences
IMF Policy Discussion Papers, September 1, 1994
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- Currency Boards: Issues and Experiences
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Bibliographic details
- Authors: Adam Bennett
- Published: September 1, 1994
- Series: IMF Policy Discussion Papers
- DOI: https://doi.org/10.5089/9781451965056.003
Overview
- Discusses issues concerning the operation of currency boards by comparison to conventional exchange rate pegs.
- Examines experiences of three examples: Argentina (from 1991), Hong Kong (from 1983) and Estonia (from 1992).
- Finds that in all three cases, the implementation of currency boards or equivalent arrangements played a significant role in their successful stabilization programs.
- Notes that currency boards derive strength from severely constraining the policy maker’s room for manoeuvre, by comparison to conventional pegs.
- States that currency boards generally require an even stricter and less forgiving attitude to bank failure, wage and price rigidities and other disturbances than do exchange rate pegs in general.
Case studies and examples
- Argentina: currency board arrangement from 1991.
- Hong Kong: currency board arrangement from 1983.
- Estonia: currency board arrangement from 1992.
- In each case, the arrangement is linked to successful stabilization programs (as described in the paper).
Key characteristics and operational issues
- Currency boards impose severe constraints on policymaker discretion relative to conventional exchange rate pegs.
- Operationally demand a stricter stance toward:
- bank failure,
- wage rigidities,
- price rigidities,
- other disturbances than required under general exchange rate pegs.
Policy implications and assessment
- The paper is a Paper on Policy Analysis and Assessment and the author(s) welcome comments on the text.
- Citations should refer to a Paper on Policy Analysis and Assessment of the International Monetary Fund mentioning the author(s) and the date of issuance.
- The views expressed are those of the author(s) and do not necessarily represent those of the Fund.