Estonia’s Way from Soviet Rouble to Own Kroon
Abstract15 years passed on 20 June 2007 from the currency reform in Estonia. Estonia was the first from the former Soviet Union republics to exit the rouble zone. In principle, the 1992 currency reform was an evolutionary process where 20th June signified only one, largely technical stage in the whole reform story. This day Soviet roubles were removed from circulation. The kroon was pegged to the German mark under the currency board arrangement principles with the exchange rate set at 1 DEM = 8 EEK. In spite all those who then, or also later, predicted a fast fall of the kroon, it has persisted at its initial external value. Since 1 January 1999 Estonian kroon was repegged at the same rate to the Euro – 1 Euro = 15.64664 EEK. It is possible to discern two absolutely different periods in the reform story – the pre-independence period and the period of actual introduction of Estonian national currency. The first period was the time of emotional (largely na?ve in economic context) discussions with clearly political colouring where the theoretical idea of the currency reform was based actually on the principle to build up a dual monetary system for the Soviet Union (the models of Rein Otsason and Vello Volt). The real opportunity to exit from the rouble zone arose only after the restoration of independence on 20 August 1991. The second period (which had no theoretical connection to the first period) was first and foremost the sum of successful ad hoc decisions. The current paper is an attempt to analyse why such decisions were made by Estonian authorities.
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Bibliographic InfoPaper provided by Tallinn School of Economics and Business Administration, Tallinn University of Technology in its series Working Papers with number 163.
Date of creation: 2007
Date of revision:
Publication status: Published in Working Papers in Economics.School of Economics and Business Administration,Tallinn University of Technology (TUTWPE), Pages 5-23
currency board; currency reform; dual monetary system; economic autonomy; inflation anticipating policy; monetary policy;
Find related papers by JEL classification:
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
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- Schrader, Klaus, 1994. "Estland auf dem Weg zur Marktwirtschaft : eine Zwischenbilanz," Kiel Discussion Papers 226, Kiel Institute for the World Economy (IfW).
- Urmas Sepp & Raoul Lättemäe & Martti Randveer, 2002. "The History and Sustainability of the CBA in Estonia," Macroeconomics 0212002, EconWPA.
- Iikka Korhonen, 2000.
"Currency Boards in the Baltic Countries: What Have We Learned?,"
Taylor & Francis Journals, vol. 12(1), pages 25-46.
- Korhonen, Iikka, 1999. "Currency Boards in the Baltic Countries: What Have We Learned?," BOFIT Discussion Papers 6/1999, Bank of Finland, Institute for Economies in Transition.
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