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Did the currency board resolve Bulgaria's financial crisis of 1996-97?

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  • CLIFFORD S. POIROT Jr.

Abstract

This paper analyzes the causes behind the Bulgarian financial crisis of 1996 and 1997. IMF staff economists and the policy adopted by the IMF focuses on a monetary explanation for banking and financial crises in transitional economies. Accordingly, the solution they offer is a monetary solution-- specifically, a currency board. Currency boards in effect force governments to adhere to a specific monetary rule. This prevents the development of necessary central bank functions.

The paper argues that the financial crisis in Bulgaria was due to poor banking regulation and the problems associated with valuing capital assets in transitional economies. The crisis was therefore not caused by purely monetary phenomena such as too much liquidity. Rather, it was the outcome of the interaction of chaotic hysteresis and financial fragility.

Suggested Citation

  • CLIFFORD S. POIROT Jr., 2003. "Did the currency board resolve Bulgaria's financial crisis of 1996-97?," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 26(1), pages 27-55.
    • Handle: RePEc:mes:postke:v:26:y:2003:i:1:p:27-55
    DOI: 10.1080/01603477.2003.11051389
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    Cited by:

    1. Sébastien Charles & Jonathan Marie, 2016. "Hyperinflation bulgare de 1997 : transition, fragilité bancaire et change," CEPN Working Papers 2016-13, Centre d'Economie de l'Université de Paris Nord.
    2. Sébastien Charles & Jonathan Marie, 2017. "Bulgaria’s hyperinflation in 1997: transition, banking fragility and foreign exchange," Post-Communist Economies, Taylor & Francis Journals, vol. 29(3), pages 313-335, July.
    3. Gedeon Shirley, 2010. "The Political Economy of Currency Boards: Case of Bosnia and Herzegovina," South East European Journal of Economics and Business, Sciendo, vol. 5(2), pages 7-20, November.
    4. Sébastien Charles & Jonathan Marie, 2020. "A Note on the Competing Causes of High Inflation in Bulgaria during the 1990s: Money Supply or Exchange Rate?," Review of Political Economy, Taylor & Francis Journals, vol. 32(3), pages 433-443, July.

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