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Comparing Currency Board Automatic Mechanism in Bulgaria, Estonia and Lithuania

Listed author(s):
  • K. Hristov
  • M. Mihaylov
  • Nikolay Nenovsky

    ()

    (Bulgarian National Bank - Head of Monetary and Financial Analysis 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.Larticle procède dune analyse transversale par pays de la deuxième génération des bureaux démission (currency boards) introduits dans trois pays de lEurope de lEst. Laccent est mis sur les caractéristiques institutionnelles, juridiques et politiques qui sont étroitement associées à lopération du mécanisme automatique (MA) des bureaux démission. Lexistence dun mécanisme automatique dans la structure dun bureau démission est souvent mise en avant comme largument majeur à lencontre de la discrétion et la subjectivité dune banque centrale classique. Parce quil nexiste aucune définition précise du mécanisme automatique dans la littérature, nous la définissons comme la présence dune relation positive de cointégratio

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Paper provided by HAL in its series Post-Print with number halshs-00259886.

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Date of creation: 2001
Publication status: Published in Journal des Economistes et des Etudes Humaines, 2001, n°XI (n°4), pp. 575-616
Handle: RePEc:hal:journl:halshs-00259886
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00259886
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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  1. K. Hristov & Nikolay Nenovsky, 2001. "The Nonorthodox Currency Boards: The Case of Bulgaria," Post-Print halshs-00260074, HAL.
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