Options for a New Monetary Framework for the Area of the Soviet Union

The paper discusses alternative options for a future monetary order in the area of the Soviet Union. Its main focus is on two questions: Under what conditions would a common rouble currency area be compatible with fiscal discipline and effective financial control over the large numbers of state-owned enterprises? If a transition to separate republican currencies is unavoidable, how can its effects on trade flows within the area of the Soviet Union be kept as small as possible? The paper analyses four options for a monetary union: the relatively unspecified Draft Treaty proposal by Yavlinsky; a monetary union according to the outline of the European System of Central Banks; a monetary union according to the model of a currency board; and a common central bank system managed by representatives from international institutions. If a system of separate currencies is to be introduced, it is essential that all republics peg to the same outside anchor, preferably the ECU. A common fixed rate system between the republics as well as a multilateral payments union could contribute to a reduction of the need for aggregate foreign exchange.