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Currency Board Arrangements (CBAs) as exchange-rate regime option

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  • Buks Wessels

Abstract

Currency Board Arrangements (CBAs) are currently advocated as a super-fixed exchange rate solution to exchange rate volatility. This paper examines the operation, benefits and disadvantages of CBAs. Benefits comprise improved policy credibility, lower inflation, increased economic growth, increased foreign capital flows, exchange rate stability and sharply reduced currency speculation. These are compared with several shortcomings of CBAs, such as the absence of a lender of last resort, real exchange rate misalignments and their consequences for the economy. The paper next focuses on the type of country that would be the most likely candidate to benefit from a CBA.

Suggested Citation

  • Buks Wessels, 2006. "Currency Board Arrangements (CBAs) as exchange-rate regime option," World Review of Entrepreneurship, Management and Sustainable Development, Inderscience Enterprises Ltd, vol. 2(4), pages 351-361.
    • Handle: RePEc:ids:wremsd:v:2:y:2006:i:4:p:351-361
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