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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

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  • Jelena Galic

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

Abstract

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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    Keywords

    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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