Currency boards

Suffering from high rates of inflation since the 1940s and having experienced two hyperinflations at the end of the 1980s, in 2019 Argentina faced an increase of prices of more than 50%. But in the 1990s Argentina achieved price stability and growth at once. What were the sources of such an immediate change? What lessons can be drawn from this experience? As in the 1990s Argentina adopted profound market reforms, stability could be considered an achievement of neoliberal diffusion. Not only international forces were propelling change; the International Monetary Found (IMF) celebrated the success and invited other emerging nations to imitate it. Nevertheless, this perspective underestimates the importance of the local context in the history of neoliberal reforms and overestimates the coherence of external forces. Through the analysis of testimonies of Argentine and foreign officials and the study of declassified documents from the IMF, this paper argues that stability was only achieved after the adoption of a currency board, which was against the recommendation of most foreign officials. Instead of a simple top-down transposition of ideas, the Argentinian case reveals the importance of the agency of technocrats. Their local innovation not only made the diffusion of neoliberalism possible, but it also turned the currency board into one of the global anti-inflationist recipes recommended to other countries, despite its heavy consequences.

El objetivo de este trabajo es analizar la economía política del proceso de endeudamiento externo en la Argentina bajo la vigencia de la convertibilidad (1991-2001). Para ello, se identifican los factores que concurren a explicar la evolución del endeudamiento externo en el período citado, las vinculaciones entre la deuda y la dinámica del modelo de acumulación en general, y el comportamiento de la elite económica en particular, el rol desempeñado por los acreedores externos (puntualmente el FMI), y las características más salientes de la crisis de la deuda que estalló en las postrimerías de la convertibilidad y, en conjunción con otros elementos, desembocó en el colapso del esquema económico en un cuadro signado por una crisis de naturaleza multidimensional sin precedentes.

This research compares the monetary conditions in Bulgaria under a currency board arrangement (CBA) with the monetary condition that would have existed in Bulgaria if the Bulgarian National Bank (BNB) followed a monetary policy based on the rules of Taylor and McCallum. Study results show that if the whole period of investigation (1999-2017) is considered, on average the monetary conditions under a CBA are less restrictive than those suggested by Taylor rule or McCallum rule based policies. This inference also holds true for the first half of the analyzed period (1999-2009). However, after the global crisis (2010-2017) on average the monetary conditions under a CBA are more restrictive than those implied by Taylor rule or McCallum rule based monetary policies.

В данной монографии делается анализ социально-экономических проблем и вызовов с которыми столкнулся Кыргызстан с точки зрения выбора валютного режима. Как денежная система во главе с Национальным банком влияет на развитие экономики и жизнь граждан. Как граждане страны расплачиваются за системные ошибки денежной системы, и каким образом выбор денежной системы программирует экономическую модель развития. Автор предлагает новую концепцию валютного режима, основанного на золотовалютном стандарте.

This paper traces the development of economic thought about “currency boards”; a rule-based monetary policy regime, involving much less (or no) discretion than most other monetary regimes. Adopting a currency board aims to get some of the credibility advantages of using a globally respected currency without foregoing seignoriage revenue or the symbolic importance often attached to a national currency.

The goal of this article is to identify the contributions of capital stock, labor input and technological progress to Bulgaria’s economic growth under a Currency Board Arrangement. In order to accomplish the goal of the paper, a growth accounting approach based on a two-factor Cobb-Douglas production function is employed. Recommendations are made on macroeconomic policies, which may assist in solving the growth problems of Bulgarian economy.

The goal of this research is to find out what determines monetary conditions in Bulgaria under a currency board arrangement – the automatic adjustment mechanism of the orthodox currency boards or discretionary policies of the government and the central bank. A time series vector autoregression for the period 1998-2018 is employed in order to investigate the impact of the fiscal reserve and the minimum required reserves of the commercial banks on the monetary base, the interbank interest rate, the money supply and the inflation rate. The empirical results indicate that the automatic adjustment mechanism does not function under the Bulgarian currency board but the policies of the government and the central bank have a discretionary effect on monetary conditions in the country.

The options for monetary discretion under the Bulgarian currency board arrangement (CBA) were analysed. A vector autoregression (VAR) was employed to identify the determinants of money supply in Bulgaria for the period 1998-2018. The results of the study imply that the movements of money supply in Bulgaria do not automatically follow the dynamics of the balance of payments but are affected in a discretionary way by the changes in the government deposit in the Issue Department of the Bulgarian National Bank (BNB). It may be inferred that money supply in Bulgaria under a CBA is more discretion-driven than automatically determined. Resumo Neste artigo analisam-se as opções de discrição monetária sob o acordo do Conselho Monetário da Bulgária (CMB). Nesse sentido, aplicou-se uma autorregressão vetorial (VAR) para identificar os determinantes da oferta monetária na Bulgária, no período compreendido entre 1998 e 2018. Os resultados sugerem que os movimentos da oferta monetária na Bulgária não seguem automaticamente a dinâmica da balança de pagamentos, mas são afetados de maneira discricionária pelas alterações dos depósitos do governo no Departamento de Emissão do Banco Nacional da Bulgária (BNB). Pode-se inferir que a oferta monetária na Bulgária sob uma CMB é mais orientada pela discrição do que determinada automaticamente.

A New Keynesian model based on Ben Aissa and Rebei (2012) is adapted to model subsidies and price controls in Brunei Darussalam. The results indicate that government intervention in the pricing of goods and services in Brunei Darussalam has created an implicit inflation target of 0.0% +/- 1.0%. These results are supported upon examination of alternative scenarios where private market prices replace subsidised prices and when the exchange rate has a zero appreciation bias.

Suffering from high rates of inflation since the 1940’s and having experienced two hyperinflations at the end of the 1980s, Argentina faced in 2019 an increase of prices of more than 50%. But in the 1990s, Argentina achieved at once prices stability and growth. Which were the sources of such an immediate change? Which lessons can be drawn from this experience? As in the 1990s Argentina adopted deep market reforms, stability could be considered an achievement of neoliberal diffusion. Not only international forces were driving forces for the change; the International Monetary Found (IMF) celebrated the success and invited other emerging nations to imitate it. Nevertheless, this perspective underestimates the importance of local context in the history of neoliberal reforms and overestimates the coherence of external forces. Through the analyses of testimonies of Argentine and foreign officials and the study of declassified documents from the IMF, this paper argues that stability was on...

The goal of this article is to identify the contributions of capital stock, labor input and technological progress to Bulgaria’s economic growth under a Currency Board Arrangement. In order to accomplish the goal of the paper, a growth accounting approach based on a two-factor Cobb-Douglas production function is employed. Recommendations are made on macroeconomic policies, which may assist in solving the growth problems of Bulgarian economy.

Different indices used to measure underlying inflation give different pictures of the typical change in the prices facing consumers. Each index has its advantages and disadvantages. It is important to distinguish between inflation in tradable goods and non-tradeable services; the former has generally been considerably lower and aligned with that in the US, as would be expected given the exchange rate link, while the latter has been boosted by Hong Kong's strong productivity growth and recent structural changes.

Almost 100 years after the creation of its Currency Board, Argentina recreated it, at a time when most countries in the world had adopted more flexible exchange rate regimes. Instead of pegging the domestic currency to gold as in the XIXth century, this time the peso was pegged to the U.S. dollar. This paper explores the nature of this regime, its historical origin, its functioning in Argentina, the difficulties it generated in manufacturing, and its traumatic end

The currency board arrangement (CBA) in Bulgaria will soon mark its twenty fifth anniversary, a period full of important policy challenges and difficult choices for the policymakers. This paper summarizes the evolution of Bulgaria's macroeconomic policy set under this monetary and exchange rate regime and the way forward. It concludes that Bulgaria's long experience with the CBA has been generally positive so far. However, it is not straightforward and unambiguous in view of the growing global and domestic development challenges ahead.

The Bulgarian experience is an example of how a currency board can function in present circumstances as global monetary systems evolve. The Bulgarian macroeconomic policy under the CBA facilitated macroeconomic stability, economic growth, and integration in the global value chains. Bulgaria has not experienced a systemic financial crisis too. However, it failed to deliver the expected income convergence to the EU average levels in the past decade. Although low, inflation is still volatile, and inequality has increased. Bulgaria’s integration in the global supply chains and trade has also been slower than one of the peers. Thus, the country urgently needs a detailed, well-designed, and credible medium-term policy framework in line with the evolving European laws to better guarantee the ultimate macroeconomic objective of the Bulgaria’s development. An important policy trade-off is to set a predictable path towards the euro adoption or the governments to continue non-transparently implement monetary policy under the CBA.