The sole function of a currency board is to exchange the domestic currency it issues for an
anchor currency at a fixed rate.
dollar as an external
anchor currency, instead of choosing an internal
anchor currency.
Europe experienced a similar development when, after the dismissal of the dollar-gold convertibility in the early 1970s, the Deutsche Mark started to act as the region's
anchor currency and the Bundesbank took the upper hand in European monetary policy.
But what gets lost in Steil's revisionist retelling is the other great contribution of Bretton Woods--a system that constrained speculative capital and created a bias in favor of economic expansion, quite apart from whether the
anchor currency was the dollar or Keynes's proposed bancor.
"We have done research which looks at three criteria as to what
anchor currency you would pick," he told The Middle East.
With capital controls largely abolished, we need to cope with the monetary policy of the
anchor currency. Monetary policy needs to be tailored to adverse local conditions, i.e.
A country that keeps its currency on oxygen and fails to safeguard savings of masses has no right to remain as super power and keep its currency as
anchor currency. Sliding dollar is not only a threat to US but whole world as it is being used as dominant reserve currency.
(d) the AMU would choose an
anchor currency. Robert Mundell maintains that a monetary union would be best for East Asia and he suggests that this requires the choice of an
anchor currency.
Perhaps a millionaire is an individual whose net wealth exceeds a sufficient amount of units of any currency when exchanged at a million units of the world's highest valued currency unit or the world's highest
anchor currency unit.
But even if the renminbi were fully convertible, the economic arguments for changing the
anchor currency are not well supported.
The next three chapters explore the prospects for East Asian economic integration, covering issues ranging from trade and economic diplomacy to the possibility of a monetary union with the yuan as the
anchor currency and its implications for South Korea.
If the clients adopt an
anchor currency independently, the joint probability that countries i and j use the currency of a common anchor k at time t is given by:
