31:
955:
876:
1105:
did not strictly follow currency board rules – a fact which many see as the true cause of its collapse. They argue that
Argentina's monetary system was an inconsistent mixture of currency board and central banking elements. It is also thought that the misunderstanding of the workings of the system by economists and policymakers contributed to the Argentine government's decision to devalue the peso in January 2002. The economy fell deeper into depression before a recovery began later in the year.
419:
1104:
abandoned its currency board in
January 2002 after a severe recession. To some, this emphasised the fact that currency boards are not irrevocable, and hence may be abandoned in the face of speculation by foreign exchange traders. However, Argentina's system was not an orthodox currency board, as it
849:
of that country is reflected by higher deposits local banks hold at the central bank as well as (initially) higher deposits of the (net) exporting firms at their local banks. The growth of the domestic money supply can now be coupled to the additional deposits of the banks at the central bank that
791:
A currency board only earns profit from interest on foreign reserves (less the expense of note-issuing), and does not engage in forward-exchange transactions. These foreign reserves exist (1) because local notes have been issued in exchange, or (2) because commercial banks must, by regulation,
862:
The virtue of this system is that questions of currency stability no longer apply. The drawbacks are that the country no longer has the ability to set monetary policy according to other domestic considerations, and that the fixed exchange rate will, to a large extent, also fix a country's
819:
A currency board does not attempt to manipulate interest rates by establishing a discount rate like a central bank. The peg with the foreign currency tends to keep interest rates and inflation very closely aligned to those in the country against whose currency the peg is
867:, irrespective of economic differences between it and its trading partners. Typically, currency boards have advantages for small, open economies which would find independent monetary policy difficult to sustain. They can also form a credible commitment to low inflation.
1546:
De la Torre, Augusto & Levy Yeyati, Eduardo & Schmukler, Sergio L., 2003. "Living and dying with hard pegs: the rise and fall of
Argentina's currency board," Policy Research Working Paper Series 2980, The World Bank.
508:
Although a currency board is a common (and simple) way of maintaining a fixed exchange rate, it is not the only way. Countries often keep exchange rates within a narrow band by regulating
1514:
1596:
1536:
1131:
A gold standard is a special case of a currency board where the value of the national currency is linked to the value of gold instead of a foreign currency.
1606:
1569:
770:
A currency board's foreign currency reserves must be sufficient to ensure that all holders of its notes and coins (and all bank creditors of a
833:
but instead will only issue one unit of local currency for each unit (or decided amount) of foreign currency it has in its vault (often a
784:
A currency board maintains absolute, unlimited convertibility between its notes and coins and the currency against which they are pegged (
753:
517:
1489:
1293:
as a "special version" of the Danish kroner, which is itself partly backed by the Euro foreign reserve of the Danish
National Bank.
809:
and does not lend to the government. Governments cannot print money, and can only tax or borrow to meet their spending commitments.
448:
1661:
1343:
1147:
1620:
1654:
Johns
Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise, Currency Board Book Series,
1658:
802:
revenue. (2) is the revenue on minimum reserves (revenue of investment activities less cost of minimum reserves remuneration)
1655:
951:
More than 70 countries have had currency boards. Currency boards were most widespread in the early and mid 20th century.
1690:
1675:
1212:
614:
1135:
746:
1367:
1558:
Schuler, Kurt. "Ignorance and
Influence: U.S. Economists on Argentina's Depression 1998-2002" (August 2005).
1649:
1109:
1077:
959:
441:
1457:
1434:
fixed to the 'milled dollar' during the
Spanish and American colonial era, up until 1941. Pegged to the
788:), at a fixed rate of exchange, with no restrictions on current-account or capital-account transactions.
1353:
568:
1589:
851:
739:
558:
136:
1685:
1484:
1096:
at par. The peg to the Euro was upheld until
January 2011 with Estonia's adoption of the Euro (see
676:
660:
645:
604:
490:
434:
1535:
Kurt
Schuler, "Currency Boards," Ph.D. dissertation, George Mason University, 1992, pp. 261-9,
1233:
722:
573:
348:
1611:
For a precise definition of what constitutes a currency board, including past examples, see:
1586:
Post-Crisis
Exchange Rate Regimes in Southeast Asia: An Empirical Survey of De-Facto Policies
1383:
1204:
1184:
1174:
813:
727:
681:
650:
563:
1657:
Studies in Applied Economics working paper series (includes many papers on currency boards),
1559:
1453:
1439:
1337:
1307:
1282:
1219:
1058:
968:
880:
838:
774:
at the currency board) can convert them into the reserve currency (usually 110–115% of the
583:
578:
553:
8:
846:
793:
509:
474:
328:
193:
156:
47:
30:
1243:
1124:
continue to operate currency boards, backing their locally printed currency notes with
1097:
1054:
1024:
588:
470:
353:
323:
277:
215:
151:
1680:
1637:, W.P. n. 10–2007, Department of Economics, University of Milan. Abstract in English.
1615:
Hanke, Steve H. (2002): "On Dollarization and Currency Boards: Error and Deception,"
1510:
1004:
418:
399:
307:
255:
112:
67:
62:
1638:
1417:
1393:
1268:
1259:
1179:
1169:
1164:
1117:
940:
707:
640:
609:
272:
262:
161:
141:
117:
1290:
1570:
History of the Monetary Systems and the Public Finances in the Bahamas, 1946-2003
1548:
1479:
1431:
1363:
1333:
1264:
1238:
954:
944:
824:
806:
771:
635:
513:
489:, currency boards were popular because of the advantages of printing appropriate
404:
381:
376:
371:
338:
302:
200:
181:
124:
87:
52:
1449:
1403:
1387:
1377:
1357:
1327:
1323:
1317:
1313:
1303:
1125:
1034:
875:
864:
502:
462:
297:
237:
22:
16:
Monetary authority which maintains a fixed exchange rate to a foreign currency
1669:
1474:
1407:
1397:
1285:
serves as the lender of last resort and all bank accounts are denominated in
1274:
1255:
1142:
1089:
1044:
834:
775:
717:
712:
691:
655:
548:
543:
282:
232:
210:
205:
188:
129:
105:
82:
72:
57:
40:
1469:
1435:
1286:
1014:
686:
498:
482:
422:
242:
220:
146:
77:
1068: Three cases of a country using or pegging the currency of a neighbor
1373:
1208:
494:
486:
343:
1595:"On Currency Boards: An Updated Bibliography of Scholarly Writings." (
1121:
830:
798:
292:
267:
168:
92:
1445:
1421:
1346:, fixed against the Deutsche Mark from 1998 until 2002. Fixed to the
1113:
1101:
1073:
1380:
from independence until 1979, issued by a currency board until 1942.
1196:
1081:
988:
917:
630:
478:
481:. This policy objective requires the conventional objectives of a
1635:
The Currency Board and the rise of banking in British East Africa
1627:
1438:
from 1942 to 1944. Post-independence, it was also pegged to the
1200:
1192:
1188:
1085:
1428:
thereafter until 2015 when the litas was replaced with the euro.
816:
to commercial banks, and does not regulate reserve requirements.
520:. Thus, a rough peg may be maintained without a currency board.
493:
for local conditions, and it also benefited the colony with the
287:
825:
Consequences of adopting a fixed exchange rate as prime target
1100:
for a detailed description of the Estonian currency board).
505:
preferred to have central banks and independent currencies.
1425:
1411:
1347:
1093:
984:
943:
is pegged to the Euro, Russian rouble and U.S. Dollar in a
884:
842:
1511:"History of Economic Thought Concerning Currency Boards"
910: Currencies pegged to the US dollar w/ narrow band
805:
A currency board has no discretionary powers to affect
523:
1227:
766:
The main qualities of an orthodox currency board are:
1650:
Currency boards and dollarization (archived Web site)
1626:
Nikolay Nenovsky's works on Currency boards issues: (
1092:
from 1992 to 1999, when it switched to fixing to the
1603:
Currency Boards for Developing Countries: A Handbook
1249:
829:
The currency board in question will no longer issue
1410:from independence in 1992 until 1999. Fixed to the
1158:
977: Currencies pegged to the United States dollar
485:to be subordinated to the exchange rate target. In
937: Currencies pegged to the euro w/ narrow band
1667:
1442:from 1946 to 1959, and again from 1966 to 1983.
870:
747:
442:
1134:
1037:users and pegs, including the United Kingdom
516:, or though international agreements, among
754:
740:
449:
435:
29:
1660:, and Digital Archive on Currency Boards.
1588:, Seminar Paper, University of Hamburg. (
1289:. The Danish National Bank refers to the
1490:Linked exchange rate system in Hong Kong
953:
904: Currencies pegged to the US dollar
898: External adopters of the US dollar
874:
1508:
1344:Bosnia and Herzegovina convertible mark
1148:Bosnia and Herzegovina convertible mark
796:at the Currency Board. (1) generates a
1668:
1297:
1424:from 1994 until 2002. Fixed to the
524:Features of orthodox currency boards
1619:Vol. 5, no. 4, pp. 203–222. (
1228:Examples against the pound sterling
996: Currencies pegged to the euro
931: Currencies pegged to the euro
925: External adopters of the euro
812:A currency board does not act as a
13:
1601:Steve H. Hanke and Kurt Schuler,
1578:
1088:had a currency board fixed to the
971:users, including the United States
854:in the hands of the central bank.
308:Trade / commerce ministry
14:
1702:
1643:
1250:Examples against other currencies
1281:currency board, but in fact the
1213:Saint Vincent and the Grenadines
1159:Examples against the U.S. dollar
857:
473:which is required to maintain a
417:
1517:from the original on 2021-12-03
1017:users and pegs, including India
615:Retail foreign exchange trading
1605:(1994, revised edition 2015).
1563:
1552:
1540:
1529:
1502:
1:
1495:
1110:British Overseas Territories
1078:Hong Kong Monetary Authority
1027:users, including New Zealand
7:
1463:
1076:operates a currency board (
10:
1707:
1354:British West African pound
1218:For complete listing, see
1007:users, including Australia
958:Worldwide official use of
871:Examples in recent history
137:Deficit / surplus
1617:Journal of Policy Reform,
1136:Examples against the euro
1061:, including South Africa)
852:foreign exchange reserves
559:Exchange-rate flexibility
238:Monetary (currency) union
1584:Tiwari, Rajnish (2003):
1485:Argentine Currency Board
960:foreign currency or pegs
677:Bretton Woods Conference
497:revenue. However, after
1691:Government institutions
1676:Foreign exchange market
1047:users, including Russia
850:equals additional hard
661:Foreign exchange option
646:Non-deliverable forward
605:Foreign exchange market
487:colonial administration
1509:Hawkins, John (2015).
1414:thereafter until 2011.
1336:was fixed against the
1234:Falkland Islands pound
1070:
948:
845:). The surplus on the
723:Foreign exchange fraud
574:Floating exchange rate
349:Discretionary spending
1458:Asian currency crisis
1390:from 1921 until 1969.
1384:East African shilling
1370:from 1884 until 1950.
1360:from 1913 until 1964.
1340:from 1966 until 1968.
1320:from 1966 until 1973.
1310:from 1991 until 2002.
1306:, pegged against the
1205:Saint Kitts and Nevis
1185:East Caribbean dollar
1175:Cayman Islands dollar
987:users, including the
957:
879:Worldwide use of the
878:
814:lender of last resort
728:Currency intervention
682:Smithsonian Agreement
669:Historical agreements
651:Foreign exchange swap
503:independent countries
1628:nikolaynenovsky.com
1454:United States dollar
1440:United States dollar
1420:, fixed against the
1406:, fixed against the
1386:, fixed against the
1366:, fixed against the
1356:, fixed against the
1338:United States dollar
1330:from 1921 until 1966
1326:, fixed against the
1316:, fixed against the
1308:United States dollar
1283:Danish National Bank
1220:United States dollar
969:United States dollar
584:Managed float regime
579:Linked exchange rate
554:Exchange rate regime
1448:initially fixed to
1368:Indian silver rupee
1298:Historical examples
1152:Konvertibilna marka
892: United States
847:balance of payments
786:the anchor currency
569:Fixed exchange rate
510:balance of payments
475:fixed exchange rate
1244:Saint Helena pound
1098:Economy of Estonia
1071:
1055:South African rand
1025:New Zealand dollar
949:
589:Dual exchange rate
471:monetary authority
354:Mandatory spending
278:Non-tariff barrier
216:Monetary authority
1376:, pegged against
1005:Australian dollar
764:
763:
459:
458:
400:Fiscal adjustment
1698:
1572:
1567:
1561:
1556:
1550:
1544:
1538:
1533:
1527:
1526:
1524:
1522:
1506:
1418:Lithuanian litas
1398:West German mark
1394:East German mark
1269:Hong Kong dollar
1260:Singapore dollar
1180:Djiboutian franc
1170:Bermudian dollar
1165:Hong Kong dollar
1118:Falkland Islands
1067:
1052:
1042:
1032:
1022:
1012:
1002:
995:
982:
976:
966:
941:Belarusian ruble
936:
930:
924:
915:
909:
903:
897:
891:
756:
749:
742:
708:Bureau de change
641:Currency forward
610:Futures exchange
531:Foreign exchange
528:
527:
514:capital controls
512:through various
451:
444:
437:
421:
273:Gains from trade
263:Balance of trade
142:Finance ministry
33:
19:
18:
1706:
1705:
1701:
1700:
1699:
1697:
1696:
1695:
1686:Monetary policy
1666:
1665:
1646:
1633:Arnaldo Mauri,
1581:
1579:Further reading
1576:
1575:
1568:
1564:
1557:
1553:
1545:
1541:
1534:
1530:
1520:
1518:
1507:
1503:
1498:
1480:Monetary policy
1466:
1452:, and then the
1432:Philippine peso
1364:Ceylonese Rupee
1334:Bahamian dollar
1300:
1265:Macanese pataca
1252:
1239:Gibraltar pound
1230:
1161:
1139:
1069:
1065:
1063:
1062:
1050:
1048:
1040:
1038:
1030:
1028:
1020:
1018:
1010:
1008:
1000:
998:
997:
993:
991:
980:
978:
974:
972:
964:
945:currency basket
938:
934:
932:
928:
926:
922:
920:
913:
911:
907:
905:
901:
899:
895:
893:
889:
873:
860:
827:
807:monetary policy
794:minimum reserve
772:Reserve Account
760:
636:Currency future
526:
477:with a foreign
455:
410:
409:
405:Monetary reform
395:
387:
386:
382:Price stability
377:Economic growth
372:Balanced budget
367:
359:
358:
339:Non-tax revenue
334:
333:
313:
312:
303:Trade diversion
258:
248:
247:
201:Discount window
184:
182:Monetary policy
174:
173:
108:
98:
97:
43:
17:
12:
11:
5:
1704:
1694:
1693:
1688:
1683:
1678:
1664:
1663:
1652:
1645:
1644:External links
1642:
1641:
1640:
1631:
1624:
1609:
1608:
1599:
1593:
1580:
1577:
1574:
1573:
1562:
1551:
1539:
1528:
1500:
1499:
1497:
1494:
1493:
1492:
1487:
1482:
1477:
1472:
1465:
1462:
1461:
1460:
1450:Pound sterling
1443:
1429:
1415:
1404:Estonian kroon
1401:
1396:pegged to the
1391:
1388:pound sterling
1381:
1378:pound sterling
1371:
1361:
1358:pound sterling
1351:
1341:
1331:
1328:pound sterling
1324:Bahamian pound
1321:
1318:pound sterling
1314:Bahraini dinar
1311:
1304:Argentine peso
1299:
1296:
1295:
1294:
1271:
1267:, against the
1262:
1258:, against the
1251:
1248:
1247:
1246:
1241:
1236:
1229:
1226:
1225:
1224:
1223:
1222:
1182:
1177:
1172:
1167:
1160:
1157:
1156:
1155:
1145:
1138:
1133:
1064:
1049:
1039:
1035:Pound sterling
1029:
1019:
1009:
999:
992:
979:
973:
963:
939:Note that the
933:
927:
921:
912:
906:
900:
894:
888:
872:
869:
865:terms of trade
859:
856:
826:
823:
822:
821:
817:
810:
803:
789:
782:
762:
761:
759:
758:
751:
744:
736:
733:
732:
731:
730:
725:
720:
715:
710:
702:
701:
697:
696:
695:
694:
689:
684:
679:
671:
670:
666:
665:
664:
663:
658:
653:
648:
643:
638:
633:
625:
624:
620:
619:
618:
617:
612:
607:
599:
598:
594:
593:
592:
591:
586:
581:
576:
571:
566:
561:
556:
551:
546:
538:
537:
536:Exchange rates
533:
532:
525:
522:
467:currency board
463:public finance
457:
456:
454:
453:
446:
439:
431:
428:
427:
426:
425:
412:
411:
408:
407:
402:
396:
393:
392:
389:
388:
385:
384:
379:
374:
368:
365:
364:
361:
360:
357:
356:
351:
346:
341:
335:
332:
331:
326:
320:
319:
318:
315:
314:
311:
310:
305:
300:
298:Trade creation
295:
290:
285:
280:
275:
270:
265:
259:
254:
253:
250:
249:
246:
245:
240:
235:
230:
229:
228:
226:currency board
223:
213:
208:
203:
198:
197:
196:
185:
180:
179:
176:
175:
172:
171:
166:
165:
164:
154:
149:
144:
139:
134:
133:
132:
122:
121:
120:
109:
104:
103:
100:
99:
96:
95:
90:
85:
80:
75:
70:
65:
60:
55:
50:
44:
39:
38:
35:
34:
26:
25:
23:Public finance
15:
9:
6:
4:
3:
2:
1703:
1692:
1689:
1687:
1684:
1682:
1679:
1677:
1674:
1673:
1671:
1662:
1659:
1656:
1653:
1651:
1648:
1647:
1639:
1636:
1632:
1629:
1625:
1622:
1618:
1614:
1613:
1612:
1607:
1604:
1600:
1597:
1594:
1591:
1587:
1583:
1582:
1571:
1566:
1560:
1555:
1549:
1543:
1537:
1532:
1516:
1512:
1505:
1501:
1491:
1488:
1486:
1483:
1481:
1478:
1476:
1475:Dollarization
1473:
1471:
1468:
1467:
1459:
1455:
1451:
1447:
1444:
1441:
1437:
1433:
1430:
1427:
1423:
1419:
1416:
1413:
1409:
1408:Deutsche Mark
1405:
1402:
1399:
1395:
1392:
1389:
1385:
1382:
1379:
1375:
1372:
1369:
1365:
1362:
1359:
1355:
1352:
1349:
1345:
1342:
1339:
1335:
1332:
1329:
1325:
1322:
1319:
1315:
1312:
1309:
1305:
1302:
1301:
1292:
1291:Faroese króna
1288:
1287:Danish kroner
1284:
1280:
1276:
1275:Faroe Islands
1272:
1270:
1266:
1263:
1261:
1257:
1256:Brunei dollar
1254:
1253:
1245:
1242:
1240:
1237:
1235:
1232:
1231:
1221:
1217:
1216:
1214:
1210:
1206:
1202:
1198:
1194:
1190:
1186:
1183:
1181:
1178:
1176:
1173:
1171:
1168:
1166:
1163:
1162:
1153:
1149:
1146:
1144:
1143:Bulgarian lev
1141:
1140:
1137:
1132:
1129:
1127:
1123:
1119:
1115:
1111:
1106:
1103:
1099:
1095:
1091:
1090:Deutsche Mark
1087:
1083:
1079:
1075:
1060:
1056:
1046:
1045:Russian ruble
1036:
1026:
1016:
1006:
990:
986:
970:
961:
956:
952:
946:
942:
919:
886:
882:
877:
868:
866:
858:Pros and cons
855:
853:
848:
844:
840:
836:
835:hard currency
832:
818:
815:
811:
808:
804:
801:
800:
795:
790:
787:
783:
780:
777:
776:monetary base
773:
769:
768:
767:
757:
752:
750:
745:
743:
738:
737:
735:
734:
729:
726:
724:
721:
719:
718:Currency pair
716:
714:
713:Hard currency
711:
709:
706:
705:
704:
703:
699:
698:
693:
692:Louvre Accord
690:
688:
685:
683:
680:
678:
675:
674:
673:
672:
668:
667:
662:
659:
657:
656:Currency swap
654:
652:
649:
647:
644:
642:
639:
637:
634:
632:
629:
628:
627:
626:
622:
621:
616:
613:
611:
608:
606:
603:
602:
601:
600:
596:
595:
590:
587:
585:
582:
580:
577:
575:
572:
570:
567:
565:
564:Dollarization
562:
560:
557:
555:
552:
550:
549:Exchange rate
547:
545:
544:Currency band
542:
541:
540:
539:
535:
534:
530:
529:
521:
519:
518:other methods
515:
511:
506:
504:
500:
496:
492:
491:denominations
488:
484:
480:
476:
472:
468:
464:
452:
447:
445:
440:
438:
433:
432:
430:
429:
424:
420:
416:
415:
414:
413:
406:
403:
401:
398:
397:
391:
390:
383:
380:
378:
375:
373:
370:
369:
363:
362:
355:
352:
350:
347:
345:
342:
340:
337:
336:
330:
327:
325:
322:
321:
317:
316:
309:
306:
304:
301:
299:
296:
294:
291:
289:
286:
284:
283:Protectionism
281:
279:
276:
274:
271:
269:
266:
264:
261:
260:
257:
252:
251:
244:
241:
239:
236:
234:
233:Monetary base
231:
227:
224:
222:
219:
218:
217:
214:
212:
211:Interest rate
209:
207:
206:Gold reserves
204:
202:
199:
195:
192:
191:
190:
189:Bank reserves
187:
186:
183:
178:
177:
170:
167:
163:
160:
159:
158:
155:
153:
150:
148:
145:
143:
140:
138:
135:
131:
128:
127:
126:
123:
119:
116:
115:
114:
111:
110:
107:
106:Fiscal policy
102:
101:
94:
91:
89:
86:
84:
81:
79:
76:
74:
71:
69:
66:
64:
61:
59:
56:
54:
51:
49:
46:
45:
42:
37:
36:
32:
28:
27:
24:
21:
20:
1634:
1616:
1610:
1602:
1585:
1565:
1554:
1542:
1531:
1519:. Retrieved
1504:
1470:Central bank
1436:Japanese yen
1278:
1151:
1130:
1107:
1072:
1015:Indian rupee
950:
861:
837:such as the
828:
797:
785:
778:
765:
687:Plaza Accord
507:
499:World War II
483:central bank
466:
460:
256:Trade policy
243:Money supply
225:
221:central bank
194:requirements
147:Fiscal union
48:Agricultural
1374:Irish pound
1350:thereafter.
1209:Saint Lucia
1080:), as does
881:U.S. dollar
839:U.S. dollar
495:seigniorage
344:Tax revenue
1670:Categories
1521:3 December
1496:References
1456:until the
1128:reserves.
1122:St. Helena
831:fiat money
799:seignorage
792:deposit a
293:Trade bloc
268:Free trade
93:Policy mix
68:Investment
63:Industrial
1446:Thai baht
1422:US dollar
1114:Gibraltar
1102:Argentina
1074:Hong Kong
1681:Currency
1515:Archived
1464:See also
1197:Dominica
1126:sterling
1082:Bulgaria
989:Eurozone
918:Eurozone
883:and the
700:See also
631:Currency
479:currency
329:Spending
157:Spending
130:internal
88:Monetary
53:Economic
41:Policies
1279:de jure
1277:have a
1201:Grenada
1193:Barbuda
1189:Antigua
1086:Estonia
1057:users (
841:or the
597:Markets
366:Optimum
324:Revenue
162:deficit
152:Revenue
1211:, and
1116:, the
1066:
1053:
1051:
1043:
1041:
1033:
1031:
1023:
1021:
1013:
1011:
1003:
1001:
994:
983:
981:
975:
967:
965:
935:
929:
923:
916:
914:
908:
902:
896:
890:
820:fixed.
623:Assets
423:Portal
394:Reform
288:Tariff
118:policy
113:Budget
83:Fiscal
73:Social
58:Energy
501:many
469:is a
78:Trade
1523:2021
1426:euro
1412:Euro
1348:Euro
1273:The
1191:and
1120:and
1108:The
1094:Euro
985:Euro
885:euro
843:euro
465:, a
125:Debt
1621:PDF
1590:PDF
1112:of
1059:CMA
461:In
169:Tax
1672::
1513:.
1215:)
1207:,
1203:,
1199:,
1195:,
1084:.
962:.
887::
781:).
779:M0
1630:)
1623:)
1598:)
1592:)
1525:.
1400:.
1187:(
1154:)
1150:(
947:.
755:e
748:t
741:v
450:e
443:t
436:v
Text is available under the Creative Commons Attribution-ShareAlike License. Additional terms may apply.
