Bulgaria: Macroeconomic and Politicaleconomic Implications of Stabilization under a Currency Board
Arrangement," Center for Liberal Studies, Sofia.
Replacing the Fed with a Currency Board
would remove the whole issue of instability.
The outcome is much different, however, where the expansion of the domestic money supply is a multiple of the initial capital inflow--where, in Machlup's terms, new money is issued on the basis of "domestic credit"--which is the case under the currency board
The benefits and costs associated with a currency board
are very similar to those for dollarization.
Banks closed for four days to allow them to prepare for the new system, and papers released 10 years ago revealed that the Decimal Currency Board
fretted about what could go wrong.
The CBK was established in 1969 to replace the Currency Board
The bill, dubbed the Financial Stability Pact by the Finance Ministry or a "fiscal board" by analogy to Bulgaria's currency board
agreement, envisions amending both the constitution and the law on the structure of the State Budget, setting a limit of two per cent on the annual Budget deficit and 40 per cent on the Budget spending as a ratio of the gross domestic product (GDP).
In fact, in Argentina, people started to withdraw their deposits almost a year before the exit from the currency board
, fueling capital flight and feeding back into market pressures to abandon the peg to the dollar - a dynamic that could be even faster and more furious in financially integrated European economies.
According to him, although Estonia fulfils the Maastricht criteria, and though Estonia has a currency board
system, Estonia is not fit to adopt the euro, at least not now.
Further progress remains deadlocked pro tem, "We have to agree on the location of the central bank and currency board
before the unified currency is launched.
As editor of Asian Monetary Monitor, he proposed a currency board
scheme to stabilise the Hong Kong dollar in 1983 that is still in operation.
Neither the Bulgarian free-market currency board
nor the Zimbabwean spontaneous (and eventually official) dollarization appears to be in the cards.