Summary of WP/93/49: “Introduction of a New National Currency: Policy, Institutional, and Technical Issues”
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International Monetary Fund
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This compilation of summaries of Working Papers released during January-June 1993 is being issued as a part of the Working Paper series. It is designed to provide the reader with an overview of the research work performed by the staff during the period. Authors of Working Papers are normally staff members of the Fund or consultants, although on occasion outside authors may collaborate with a staff member in writing a paper. The views expressed in the Working Papers or their summaries are, however, those of the authors and should not necessarily be interpreted as representing the views of the Fund. Copies of individual Working Papers and information on subscriptions to the annual series of Working Papers may be obtained from IMF Publication Services, International Monetary Fund, 700 19th Street, Washington, D.C. 20431. Telephone: (202) 623-7430 Telefax: (202) 623-7201

Abstract

This compilation of summaries of Working Papers released during January-June 1993 is being issued as a part of the Working Paper series. It is designed to provide the reader with an overview of the research work performed by the staff during the period. Authors of Working Papers are normally staff members of the Fund or consultants, although on occasion outside authors may collaborate with a staff member in writing a paper. The views expressed in the Working Papers or their summaries are, however, those of the authors and should not necessarily be interpreted as representing the views of the Fund. Copies of individual Working Papers and information on subscriptions to the annual series of Working Papers may be obtained from IMF Publication Services, International Monetary Fund, 700 19th Street, Washington, D.C. 20431. Telephone: (202) 623-7430 Telefax: (202) 623-7201

In the last few years, a number of countries in the former Soviet Union and Eastern Europe have become independent or have regained their independence. Many have chosen to issue their own currencies, and more are likely to do so. Drawing on these and earlier experiences, this paper summarizes the main policy and institutional arrangements necessary for the introduction of a new currency and discusses the key features of, and procedures for, the conversion.

The paper is designed as a working document for those involved with currency reforms to help ensure that all the necessary steps are taken before, during, and immediately after a new currency is introduced. It focuses on issues directly related to the introduction of a new currency. In many areas, checklists present the steps that must be taken and the most reasonable options. Other related issues, for example, supporting financial sector legislation, will arise whether or not a country remains in a wider currency area.

First, the paper discusses the main macroeconomic and operational measures required to prepare for the orderly transition to the new currency, including decisions regarding the choice of exchange regime, the issuance of coupons, and the costs and benefits of currency reforms. The next section covers issues relating to the production of the new currency bank notes. Next, the main features and terms of the conversion are discussed, as well as certain special issues, such as speculative inflows and the treatment of banks’ customers and old currency contracts. The last section covers the operation of the foreign exchange market and maintenance of exchange rate stability in the period immediately following the introduction of the new currency. An appendix covers the technical aspects of currency handling, accounting, and management.

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Working Paper Summaries (WP/93/1 - WP/93/54)
Author:
International Monetary Fund