II. Considerations for Adopting a Currency Board
Author:
Mr. Charles Enoch
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Mr. Tomás J. T. Baliño https://isni.org/isni/0000000404811396 International Monetary Fund

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Language:
English
Print Publication Date:
05 Sep 1997
Keywords:
OP; deposit; bank; CBA.; exchange rate; Banco de la Nacion Argentina; money market rate; appendix I. interest rate convergence; CBA country; U.S. dollar; Exchange rates; Currencies; Currency boards; Commercial banks; Caribbean; Baltics; Central Asia; Europe; Global; exchange rate misalignment; nominal exchange rate; Hong Kong CBA; Inflation; Conventional peg; Exchange rate arrangements; Government debt management

Abstract

CBAs may appear attractive to small open economies with limited central banking expertise and incipient financial markets, or to countries that wish to preserve the benefits of belonging to a broader trade or currency area, or envisage joining a currency union. In addition, they may be attractive to countries where lack of credibility severely constrains the effectiveness of monetary policy or exposes the economy to recurrent currency crises and high risk premiums (Box 3). However, a CBA cannot of itself create credibility unless accompanied by firm supporting policies. Without such policies, credibility will remain low, which will undermine the sustainability of the CBA itself.

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Cover Currency Board Arrangements
Currency Board Arrangements
Issues and Experiences
ISBN:
9781557756688
ISSN:
0251-6365
Publication Date:
05 Sep 1997
Publisher:
International Monetary Fund
DOI:
https://doi.org/10.5089/9781557756688.084
Pages:
43

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