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)| false Gulde, Anne-Marie, and Peter Keller, 2002, The Choice of Exchange Rate Regime and Monetary Policy Rile in Accession to EU and Entry to EMU ( Another Look at Currency Board Arrangements and Hard Currency Pegs for EU Accession Countries, in: Tallinn: Bank of Estonia).
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The authors would like to thank the many officials—current and past—in Lithuania, Latvia, and Estonia that gave generously of their time and without whose help this paper would not have been possible. They would also like to thank Krista Ebruk and Pille Pank in the IMF office in Tallinn, Dalia Tregiene, Ingrida Stankeviciene, and Arnoldas Lakis in the IMF office in Vilnius, and Vita Zunda and Gints Baburs in the IMF office in Riga not only for their help in this project, but also for many years of devoted service.
In fact, the first formal contact with the IMF took place when the Deputy Managing Director, Richard Erb, met in Tallinn with delegations from the three Baltic countries on September 22–25, shortly after the three Baltic countries had regained their independence.
Under a currency board arrangement, base or central bank money could be created only against convertible foreign currency. Thus, there would be no scope for discretionary monetary policy; no central bank credit to Government or enterprises; and lending to banks only under exceptional circumstances, when the soundness of the entire banking sector was at risk.
One general note of caution is in order. When interpreting official output statistics one should keep in mind that the initial decline in output may be overstated, as some of the previous recorded output was not marketable. On the other hand, in the recovery phase, actual output may be higher than recorded; the unrecorded sector (services and small industries) is typically rising rapidly in transition economies. See Anders Åslund, Building Capitalism: The Transformation of the Former Soviet Bloc, Cambridge University Press, 2002, on this point.
In Lithuania, structural reform was also made difficult by the large agricultural sector and several large companies, such as the Mazeikiu refinery, that had complicated links to Russian energy providers.
Deposits with the state savings bank had been blocked in 1991, and their real value had been eroded by inflation rampant at the time.