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Does the currency board regime provide an exit strategy: example of the transition economy in the process of EU/EMU accession


  • Jelena Galic

    () (Deloitte doo, Belgrade Managing Director Business Advisory Services)


The theory of international economy does not provide an unambiguous answer to the question which exchange rate regime is optimal for a certain country. Faced with macroeconomic instability, high inflation expectations and poor growth, a number of European transition economies have opted for the currency board regime. The author of the paper analyses the advantages and disadvantages of this regime. In addition, the question that arises is whether this regime provides an exit strategy, what the costs of abandoning the regime are and what could be the alternative strategy for countries which are abandoning the regime. The paper concludes that, in addition to alternative possibilities for abandoning the currency board regime, this regime is still a more superior option for countries in the EU accession process.

Suggested Citation

  • Jelena Galic, 2012. "Does the currency board regime provide an exit strategy: example of the transition economy in the process of EU/EMU accession," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 1(1), pages 59-75.
  • Handle: RePEc:cbk:journl:v:1:y:2012:i:1:p:59-75

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    References listed on IDEAS

    1. Blejer, Mario I. & Cheasty, Adrienne, 1988. "High inflation, heterodox stabilization, and fiscal policy," World Development, Elsevier, vol. 16(8), pages 867-881, August.
    2. Giannaros, Demetrios S. & Kolluri, Bharat R., 1985. "Deficit spending, money, and inflation: Some international empirical evidence," Journal of Macroeconomics, Elsevier, vol. 7(3), pages 401-417.
    3. Rudiger Dornbusch & Stanley Fischer, 1986. "Stopping hyperinflations past and present," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 122(1), pages 1-47, March.
    4. McCallum, Bennett T, 1984. "Are Bond-Financed Deficits Inflationary? A Ricardian Analysis," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 123-135, February.
    5. Peter J. Montiel, 1989. "Empirical Analysis of High-Inflation Episodes in Argentina, Brazil, and Israel," IMF Staff Papers, Palgrave Macmillan, vol. 36(3), pages 527-549, September.
    6. Vito Tanzi, 1993. "The Budget Deficit in Transition: A Cautionary Note," IMF Staff Papers, Palgrave Macmillan, vol. 40(3), pages 697-707, September.
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    More about this item


    currency board; exit option; credibility; EU accession;

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System


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