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Impact of the Currency Board System on the course of International Economic Crises

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  • Ilina Lilova

Abstract

The development of the international economic crises is investigated in countries with currency board compared to countries with central banks. The couples of countries: Argentina – Brazil (at the time of the crisis in Mexico) and Hong Kong – Singapore (at the time of the crisis in SE Asia) are studied. The mechanisms are derived, due to which the countries with currency board suffer stronger collapse during the crises, and recover more slowly. The external shocks reduce considerably the growth in economies with currency board, resulting in higher unemployment rates and quicker drop in investments, aggravation of the foreign trade balance. It is mainly due to the fixed exchange rate, the inability of the governments to pursue a monetary policy and the vulnerable confidence of the economic entities in the stability of the currency board. Conclusions are made with recommendations for Bulgaria under the conditions of global economic crisis.

Suggested Citation

  • Ilina Lilova, 2009. "Impact of the Currency Board System on the course of International Economic Crises," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 70-81.
  • Handle: RePEc:bas:econth:y:2009:i:6:p:70-81
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    References listed on IDEAS

    as
    1. Ying Wu, 2005. "Determining a Modified Currency Board's Two-Period Exchange Rate Strategy," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 11(4), pages 347-357, November.
    2. Augusto de la Torre & Eduardo Levy Yeyati & Sergio L. Schmukler, 2003. "Living and Dying with Hard Pegs: The Rise and Fall of Argentina’s Currency Board," ECONOMIA JOURNAL, THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION - LACEA, vol. 0(Spring 20), pages 43-108, January.
    3. repec:kap:iaecre:v:11:y:2005:i:4:p:347-357 is not listed on IDEAS
    4. repec:cto:journl:v:20:y:2000:i:1:p:49-59 is not listed on IDEAS
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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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