New currencies in the Former Soviet Union: a recipe for hyperinflation or the path to price stability
AbstractThis paper describes the break-up of the rouble zone after the collapse of the Soviet Union in December 1991 and the opportunities and risks involved in establishing separate currencies in the new republics of the FSU. Fundamental disagreements about the desirable pace of economic reform, together with the need for radical changes in the pattern of economic activity, greatly weakened the case for retention of a single currency. Also, by mid-1993, the reformers in Russia had realised that continued use of the rouble by the republics weakened the authorities' ability to control monetary developments. The introduction of new currencies in countries lacking experience of economic policy making is bound to be a messy and uncertain process. The paper discusses the policy choices involved, in particular the appropriate exchange rate regime and the possible role for a currency board as a way of giving monetary policy credibility at an early stage in the transition. It concludes that bringing the fiscal position under control should be the first aim of policy for these countries. In the absence of bond markets deficits will tend to be money financed and the choice of exchange rate regime, by itself, is probably of second-order importance. The paper concludes with seven case studies, including the Baltic States and the Ukraine. When the paper was written, some republics had inflation rates of 25% a month or more, and there seemed little prospect of a rapid fall. In fact performance has generally been rather better than then seemed likely. The main reasons for this seem to have been the absence of a 'flight-from-money' typical of Latin-American hyperinflation. Fiscal deficits have been kept under reasonable control, probably as a result of external pressure.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Bank of England in its series Bank of England working papers with number 26.
Date of creation: Sep 1994
Date of revision:
Contact details of provider:
Postal: Publications Group Bank of England Threadneedle Street London EC2R 8AH
Phone: +44 (0)171 601 4030
Fax: +44 (0)171 601 5196
Web page: http://www.bankofengland.co.uk/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kent Osband & Delano Villanueva, 1992.
"Independent Currency Authorities: An Analytic Primer,"
IMF Working Papers
92/50, International Monetary Fund.
- Kent Osband & Delano Villanueva, 1993. "Independent Currency Authorities: An Analytic Primer," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 202-216, March.
- Cukierman, A. & Miller, G.P. & Neyapti, B., 2000.
"Central Bank Reform, Liberalization and Inflation in Transition Economies: An International Perspective,"
2000-106, Tilburg University, Center for Economic Research.
- Cukierman, Alex & Miller, Geoffrey P. & Neyapti, Bilin, 2002. "Central bank reform, liberalization and inflation in transition economies--an international perspective," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 237-264, March.
- Cukierman, Alex & Miller, Geoffrey & Neyapti, Bilin, 2001. "Central Bank Reform, Liberalization and Inflation in Transition Economies - An International Perspective," CEPR Discussion Papers 2808, C.E.P.R. Discussion Papers.
- Cukierman, A. & Miller, G.P. & Neyapti, B., 2000. "Central Bank Rerform, Liberalization and Inflation in Transition Economies - an International Perspective," Papers 00-19, Tel Aviv.
- Cukierman, A. & Miller, G.P. & Neyapti, B., 2000. "Central Bank Rerform, Liberalization and Inflation in Transition Economies - an International Perspective," Papers 2000-19, Tel Aviv.
- Lotz, Sebastien, 2004. "Introducing a new currency: Government policy and prices," European Economic Review, Elsevier, vol. 48(5), pages 959-982, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Publications Team).
If references are entirely missing, you can add them using this form.