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Currency Boards (currency + board)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting58%
Humanities and Social Sciences41%

Selected Abstracts

Currency boards: More than a quick fix?

ECONOMIC POLICY, Issue 31 2000
Atish R. Ghosh
Once a popular colonial monetary arrangement, currency boards fell into disuse as countries gained political independence. But recently, currency boards have made a remarkable come-back. This essay takes a critical look at their performance. Are currency boards really a panacea for achieving low inflation and high growth? Or do they merely provide a ,quick fix' allowing authorities to neglect fundamental reforms and thus fail to yield lasting benefits? We have three major findings. First, the historical track record of currency boards is sterling, with few instances of speculative attacks and virtually no ,involuntary' exits. Countries that did exit from currency boards did so mainly for political, rather than economic reasons, and such exits were usually uneventful. Second, modern currency boards have often been instituted to gain credibility following a period of high or hyperinflation, and in this regard, have been remarkably successful. Countries with currency boards experienced lower inflation and higher (if more volatile) GDP growth compared to both floating regimes and simple pegs. The inflation difference reflects both a lower growth rate of money supply (a ,discipline effect'), and a faster growth of money demand (a ,credibility effect'). The GDP growth effect is significant, but may simply reflect a rebound from depressed levels. Third, case studies reveal the successful introduction of a currency board to be far from trivial, requiring lengthy legal and institutional changes, as well as a broad economic and social consensus for the implied commitment. Moreover, there are thorny issues, as yet untested, regarding possible exits from a currency board. Thus currency boards do not provide easy solutions. But if introduced in the right circumstances, with some built-in flexibility, they can be an important tool for gaining credibility and achieving macroeconomic stabilization. [source]

Currency boards and Chinese banks in Malaya and the Philippines before World War II

AUSTRALIAN ECONOMIC HISTORY REVIEW, Issue 2 2003
W. G. Huff
This article examines the relationship between currency boards and the development of local Chinese deposit banking in Malaya and the Philippines before World War II. While in both countries Chinese banks filled an important gap in financial intermediation, the currency board system , an especially strict version of the classical gold standard , virtually ensured that these institutions remained small. Moreover, in the slump of the 1930s the currency board system's preclusion of a central bank and requirement to pay depositors in 100% metropolitan currency, together with the volatility of highly staple-dependent export economies, pushed Chinese banks to the verge of bankruptcy or beyond. Examination of the 1930s crisis in South-East Asia and the role of banks in it reveals more differences from than parallels with the 1990s experience. [source]

SIR ALAN WALTERS' ROLE IN THE REVIVAL OF CURRENCY BOARDS1

ECONOMIC AFFAIRS, Issue 2 2009
John GreenwoodArticle first published online: 1 JUN 200
In a speech given in 2004, at a meeting held at the Institute of Economic Affairs in honour of Sir Alan Walters who died in 2009, John Greenwood explains Sir Alan's critical role in the creation of a currency board in Hong Kong in 1983. [source]

Currency boards: More than a quick fix?

ECONOMIC POLICY, Issue 31 2000
Atish R. Ghosh
Once a popular colonial monetary arrangement, currency boards fell into disuse as countries gained political independence. But recently, currency boards have made a remarkable come-back. This essay takes a critical look at their performance. Are currency boards really a panacea for achieving low inflation and high growth? Or do they merely provide a ,quick fix' allowing authorities to neglect fundamental reforms and thus fail to yield lasting benefits? We have three major findings. First, the historical track record of currency boards is sterling, with few instances of speculative attacks and virtually no ,involuntary' exits. Countries that did exit from currency boards did so mainly for political, rather than economic reasons, and such exits were usually uneventful. Second, modern currency boards have often been instituted to gain credibility following a period of high or hyperinflation, and in this regard, have been remarkably successful. Countries with currency boards experienced lower inflation and higher (if more volatile) GDP growth compared to both floating regimes and simple pegs. The inflation difference reflects both a lower growth rate of money supply (a ,discipline effect'), and a faster growth of money demand (a ,credibility effect'). The GDP growth effect is significant, but may simply reflect a rebound from depressed levels. Third, case studies reveal the successful introduction of a currency board to be far from trivial, requiring lengthy legal and institutional changes, as well as a broad economic and social consensus for the implied commitment. Moreover, there are thorny issues, as yet untested, regarding possible exits from a currency board. Thus currency boards do not provide easy solutions. But if introduced in the right circumstances, with some built-in flexibility, they can be an important tool for gaining credibility and achieving macroeconomic stabilization. [source]

FACTORS INHIBITING DEFLATIONARY BIAS IN CURRENCY BOARD ECONOMIES: EVIDENCE FROM THE COLONIAL ERA

AUSTRALIAN ECONOMIC HISTORY REVIEW, Issue 2 2006
Article first published online: 16 JUN 200, Malcolm Treadgold
colonial economies; currency board; deflationary bias; economic growth A traditional criticism of currency boards is that they impart a deflationary bias to growing economies. Three factors, however, may inhibit the bias: increases in the velocity of money; increases in the monetary base, which under a currency board occur only through balance-of-payments surpluses; and increases in the money multiplier. This article investigates each of the factors in Fiji, Ghana, Jamaica and Malaya over various periods near the end of the colonial era. Except in Malaya, where the money multiplier declined, all helped prevent deflationary outcomes. In broad terms, growth in the monetary base was the most important. [source]

Currency boards: More than a quick fix?

ECONOMIC POLICY, Issue 31 2000
Atish R. Ghosh
Once a popular colonial monetary arrangement, currency boards fell into disuse as countries gained political independence. But recently, currency boards have made a remarkable come-back. This essay takes a critical look at their performance. Are currency boards really a panacea for achieving low inflation and high growth? Or do they merely provide a ,quick fix' allowing authorities to neglect fundamental reforms and thus fail to yield lasting benefits? We have three major findings. First, the historical track record of currency boards is sterling, with few instances of speculative attacks and virtually no ,involuntary' exits. Countries that did exit from currency boards did so mainly for political, rather than economic reasons, and such exits were usually uneventful. Second, modern currency boards have often been instituted to gain credibility following a period of high or hyperinflation, and in this regard, have been remarkably successful. Countries with currency boards experienced lower inflation and higher (if more volatile) GDP growth compared to both floating regimes and simple pegs. The inflation difference reflects both a lower growth rate of money supply (a ,discipline effect'), and a faster growth of money demand (a ,credibility effect'). The GDP growth effect is significant, but may simply reflect a rebound from depressed levels. Third, case studies reveal the successful introduction of a currency board to be far from trivial, requiring lengthy legal and institutional changes, as well as a broad economic and social consensus for the implied commitment. Moreover, there are thorny issues, as yet untested, regarding possible exits from a currency board. Thus currency boards do not provide easy solutions. But if introduced in the right circumstances, with some built-in flexibility, they can be an important tool for gaining credibility and achieving macroeconomic stabilization. [source]

Designing Macroeconomic Frameworks: A Positive Analysis of Monetary and Fiscal Delegation,

INTERNATIONAL FINANCE, Issue 1 2005
Francesca Castellani
This paper proposes a simple model illustrating the potential benefits of approaching the design of a macroeconomic framework conducive to low inflation in both its monetary and fiscal dimensions rather than relying exclusively on the merits of central bank independence and other monetary commitment devices such as currency boards or dollarization. The reason is that monetary delegation alone merely ,relocates' the time-inconsistency problem stemming from the government's incentive to address structural output shortfall with a macroeconomic stimulus. This paper also provides a new argument explaining why fiscal deficit rules may be less effective than instrument-specific rules. [source]

The contribution of domestic and external factors to emerging market currency crises: an early warning systems approach,

INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 3 2007
Steven B. Kamin
Abstract In this paper, a modified ,early warning system' (EWS) approach is developed to identify the roles of domestic and external factors in emerging market crises. Several probit models of currency crises were estimated for 26 emerging market countries. These models were used to identify the separate contributions to the probabilities of crisis of domestic and external variables. We found that, relative to domestic factors, adverse external shocks and large external imbalances contributed little to the average estimated probability of crisis in emerging market countries, but accounted for much more of the spikes in the probability of crisis estimated to occur during actual crisis years. We interpret these results to suggest that while, on average over time, domestic factors have tended to contribute to much of the underlying vulnerability of emerging market countries, adverse swings in external factors may have been important in pushing economies ,over the edge' and into currency crisis. In consequence, the costs of giving up exchange rate flexibility through adoption of strongly fixed exchange rate regimes,e.g. currency boards or dollarization,may be quite high for some countries. Published in 2007 by John Wiley & Sons, Ltd. [source]

THE HONG KONG CURRENCY BOARD'S DEFENSE AGAINST FINANCIAL MARKET PRESSURE: A BEHAVIORAL PERSPECTIVE

THE DEVELOPING ECONOMIES, Issue 2 2002
Miron MUSHKAT
Exchange rate regimes do not operate in an institutional vacuum, even when the scope for exercising policy discretion is distinctly limited. The Hong Kong linked exchange rate system is no exception. An interesting feature of the institutional environment in this case, not highlighted previously, is the apparent divergence in the assumptions of policymakers and market players regarding the merits of this mechanism in particular and currency boards in general. The corollary is that the Hong Kong monetary authorities need to intensify their efforts to disseminate relevant information, focusing especially on targets in the financial sector. [source]

FACTORS INHIBITING DEFLATIONARY BIAS IN CURRENCY BOARD ECONOMIES: EVIDENCE FROM THE COLONIAL ERA

AUSTRALIAN ECONOMIC HISTORY REVIEW, Issue 2 2006
Article first published online: 16 JUN 200, Malcolm Treadgold
colonial economies; currency board; deflationary bias; economic growth A traditional criticism of currency boards is that they impart a deflationary bias to growing economies. Three factors, however, may inhibit the bias: increases in the velocity of money; increases in the monetary base, which under a currency board occur only through balance-of-payments surpluses; and increases in the money multiplier. This article investigates each of the factors in Fiji, Ghana, Jamaica and Malaya over various periods near the end of the colonial era. Except in Malaya, where the money multiplier declined, all helped prevent deflationary outcomes. In broad terms, growth in the monetary base was the most important. [source]

Currency boards and Chinese banks in Malaya and the Philippines before World War II

AUSTRALIAN ECONOMIC HISTORY REVIEW, Issue 2 2003
W. G. Huff
This article examines the relationship between currency boards and the development of local Chinese deposit banking in Malaya and the Philippines before World War II. While in both countries Chinese banks filled an important gap in financial intermediation, the currency board system , an especially strict version of the classical gold standard , virtually ensured that these institutions remained small. Moreover, in the slump of the 1930s the currency board system's preclusion of a central bank and requirement to pay depositors in 100% metropolitan currency, together with the volatility of highly staple-dependent export economies, pushed Chinese banks to the verge of bankruptcy or beyond. Examination of the 1930s crisis in South-East Asia and the role of banks in it reveals more differences from than parallels with the 1990s experience. [source]