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Comparing Currency Board Automatic Mechanism in Bulgaria, Estonia and Lithuania

  • Nenovsky Nikolay

    (University of National and World Economy)

  • Hristov Kalin

    (University of National and World Economy)

  • Mihaylov Mihail

    (Bulgarian National Bank, Research Department)

The paper presents a cross-country analysis of the second generation of currency boards (CB) introduced in three East European countries: Bulgaria, Estonia and Lithuania. We focus on their institutional, legal and political characteristics which are closely associated with the operation of the automatic mechanism (AM) of currency boards. The presence of an automatic mechanism within the framework of the currency board is often cited as a major counterpoint to the “discretion and subjectivity” of a classical central bank. Since there is no precise definition of automatic mechanisms in the literature, we define it as: “the presence of a positive cointegration relationship between the balance of payments and the reserve money (or money supply) and absence of discretionary variables in the model.” When discretionary variables are present in the model in one form or another, we may speak of a “mechanism for adjustment through discretion – conscious or unconscious.” Within the framework of the second generation of currency boards, we reduce the channel of discretion to the presence of atypical balance sheet items and employment of a number of monetary policy instruments. We seek in this article to compare currency board automatic mechanism in Bulgaria, Estonia and Lithuania.L’article procède d’une analyse transversale par pays de la deuxième génération des “bureaux d’émission” (currency boards) introduits dans trois pays de l’Europe de l’Est. L’accent est mis sur les caractéristiques institutionnelles, juridiques et politiques qui sont étroitement associées à l’opération du mécanisme automatique (MA) des bureaux d’émission. L’existence d’un mécanisme automatique dans la structure d’un bureau d’émission est souvent mise en avant comme l’argument majeur à l’encontre de la “discrétion” et la “subjectivité” d’une banque centrale classique. Parce qu’il n’existe aucune définition précise du mécanisme automatique dans la littérature, nous la définissons comme “la présence d’une relation positive de cointégration entre la balance des paiements et les réserves monétaires (ou l’offre de monnaie) et l’absence de variables discrétionna- ires dans le modèle”. Quand des variables discrétionnaires sont présentes dans le modèle sous une forme ou une autre, nous pouvons parler d’un “mécanisme d’ajustement discrétionnaire – conscient ou inconscient”. Au sein de la structure de la deuxième génération des bureaux d’émission, la discrétion se réduit à la présence de postes atypiques dans le bilan et à l’emploi d’un certain nombre d’instruments de politique monétaire.L’article propose une comparaison du mécanisme automatique en Bulgarie, Estonie et Lithuanie.

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Article provided by De Gruyter in its journal Journal des Economistes et des Etudes Humaines.

Volume (Year): 11 (2001)
Issue (Month): 4 (December)
Pages: 1-44

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Handle: RePEc:bpj:jeehcn:v:11:y:2001:i:4:n:2
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