THE HISTORICAL DEVELOPMENT of the Honduran monetary system has been largely an outgrowth of changing economic circumstances and inelastic monetary legislation.1 The system has not been used as an instrument to promote economic development, and there has been no coordination of fiscal and monetary policy. The reforms of 1950, which include the creation of a Central Bank, indicate, however, that Honduras is now likely to attempt to use fiscal and monetary policy more actively to assist the growth of the national economy.
THE EVOLUTION of the monetary and exchange system that has come to be known as the sterling area dates back to a time when almost all the territories outside Great Britain and Ireland in which this system operates were British colonial dependencies.1 For later stages of its history, as the concept of Dominion status crystallized and the number of territories to which it was applied increased, the distinction can be made, for convenience, between the Dominions, which now have complete control of their national currency and exchange policies, and other parts of the British Commonwealth which have not yet attained that status—leaving aside altogether members of the sterling area which are outside the British Commonwealth. The process of growth has been continuous throughout; it is, moreover, not yet complete. A sketch of the earlier stages of its history will contribute to a proper understanding of the sterling area as it operates today and, in particular, of the position in the sterling area of the territories which operate under the Colonial Sterling Exchange Standard.