How to reduce inflation: an independent central bank or a currency board? The experience of the Baltic countries
Countries in transition often face high levels of inflation. This paper discusses two ways to reduce inflation: the creation of an independent central bank and the introduction of a currency board. It is shown that both options have advantages and disadvantages. This framework is used for a normative analysis of the policy choices of the Baltic states. It is argued that, while Estonia's currency board based on the D-mark is very much in line with the criteria for an optimal monetary regime, Lithuania's initial choice of a US-dollar based currency board is not. The peg to the SDR - which very much looks like a currency board - as (eventually) adopted by Latvia is an intermediate case. Some policy recommendations and the problem of exit strategies towards the Euro zone are discussed.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Richard W. Kopcke, 1999. "Currency boards: once and future monetary regimes?," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 21-37.
- 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.
- Korhonen, Iikka, 1999. "Currency boards in the Baltic countries : What have we learned?," BOFIT Discussion Papers 9/1999, Bank of Finland, Institute for Economies in Transition.
- Jeffrey A. Frankel, 1999. "No Single Currency Regime is Right for All Countries or At All Times," NBER Working Papers 7338, National Bureau of Economic Research, Inc.
- Loungani, Prakash & Sheets, Nathan, 1997.
"Central Bank Independence, Inflation, and Growth in Transition Economies,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 29(3), pages 381-399, August.
- Prakash Loungani & Nathan Sheets, 1995. "Central bank independence, inflation and growth in transition economies," International Finance Discussion Papers 519, Board of Governors of the Federal Reserve System (U.S.).
- Eijffinger, Sylvester & Haan, Jakob de, 2000.
"European Monetary and Fiscal Policy,"
Oxford University Press, number 9780198776161.
- Eijffinger, S. & De Hann, J., 1995.
"The Political Economy of Central Bank Independence,"
9587, Tilburg - Center for Economic Research.
- Eijffinger, S-C-W & de Haan, J, 1996. "The Political Economy of Central-Bank Independence," Princeton Studies in International Economics 19, International Economics Section, Departement of Economics Princeton University,.
- Donal McGettigan, 2000. "Current Account and External Sustainability in the Baltics, Russia, and Other Countries of the Former Soviet Union," IMF Occasional Papers 189, International Monetary Fund.
- Berger, Helge & Jensen, Henrik & Schjelderup, Guttorm, 2001.
"To peg or not to peg?: A simple model of exchange rate regime choice in small economies,"
Elsevier, vol. 73(2), pages 161-167, November.
- Helge Berger & Henrik Jensen & Guttorm Schjelderup, 2001. "To Peg or Not To Peg? A Simple Model of Exchange Rate Regime Choice In Small Economies," CESifo Working Paper Series 468, CESifo Group Munich.
- Sikken, Bernd Jan & de Haan, Jakob, 1998. "Budget Deficits, Monetization, and Central-Bank Independence in Developing Countries," Oxford Economic Papers, Oxford University Press, vol. 50(3), pages 493-511, July.
- John Williamson, 1995.
"What Role of Currency Boards?,"
Peterson Institute Press: All Books,
Peterson Institute for International Economics, number pa40, 03.
- John Williamson, 1995. "What Role of Currency Boards?," Peterson Institute Press: Policy Analyses in International Economics, Peterson Institute for International Economics, number pa40.
- Fleming, Alex & Talley, Samuel, 1996. "The Latvian banking crisis : lessons learned," Policy Research Working Paper Series 1590, The World Bank.
- Berger, Helge & de Haan, Jakob & Eijffinger, Sylvester C W, 2000.
"Central Bank Independence: An Update of Theory and Evidence,"
CEPR Discussion Papers
2353, C.E.P.R. Discussion Papers.
- Berger, Helge & de Haan, Jakob & Eijffinger, Sylvester C W, 2001. " Central Bank Independence: An Update of Theory and Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 15(1), pages 3-40, February.
- Atish R. Ghosh & Anne-Marie Gulde & Holger C. Wolf, 2000. "Currency boards: More than a quick fix?," Economic Policy, CEPR;CES;MSH, vol. 15(31), pages 269-335, October.
When requesting a correction, please mention this item's handle: RePEc:eee:ememar:v:2:y:2001:i:3:p:218-243. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.