Cover IMF Working Papers
Dual Currency Boards: A Proposal for Currency Stability
Author:
Mr. S. E Oppers
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Series:
IMF Working Papers
Volume/Issue:
Volume 2000: Issue 199
Language:
English
Publication Date:
01 Dec 2000
DOI:
https://doi.org/10.5089/9781451860108.001
ISBN:
9781451860108
ISSN:
1018-5941
Pages:
22
Keywords:
WP; currency; exchange rate; reserve currency; euro; dollar; Exchange rate regimes; fixed exchange rates; currency board; cross rate; parity relationship; depreciation vis-à-vis; money machine; parity euro-dollar rate; currency movement; CB euro rate; currency Board rate; currency Board system; currency-board cross rate; euro-dollar rate; currency stability; Currency boards; Reserve currencies; Currencies; Exchange rates; Conventional peg; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper shows that extending the convertibility guarantee of the traditional currency board to a second reserve currency brings about an automatic, market-driven change of the peg when the initial reserve currency appreciates beyond a specified level. The “dual” currency board thus maintains the advantages of a hard peg, but avoids the economic difficulties associated with the link to an overvalued reserve currency. As an added benefit, the system has the potential to promote global currency stability, with the reserves of the dual currency board country acting as a buffer stock to the exchange cross-rate of the chosen reserve currencies.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2000: Issue 199