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Comparing Currency Board Automatic Mechanism in Bulgaria, Estonia and Lithuania


  • 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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Suggested Citation

  • Nikolay Nenovsky, 2001. "Comparing Currency Board Automatic Mechanism in Bulgaria, Estonia and Lithuania," Post-Print halshs-00260066, HAL.
  • Handle: RePEc:hal:journl:halshs-00260066
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    References listed on IDEAS

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

    1. Minea, Alexandru & Rault, Christophe, 2011. "External monetary shocks and monetary integration: Evidence from the Bulgarian currency board," Economic Modelling, Elsevier, vol. 28(5), pages 2271-2281, September.
    2. Sutela, Pekka, 2001. "Managing capital flows in Estonia and Latvia," BOFIT Discussion Papers 17/2001, Bank of Finland, Institute for Economies in Transition.
    3. Jean-Baptiste Desquilbet & Nikolay Nenovsky, 2005. "Confiance et ajustement dans les régimes d'étalon-or et de caisse d'émission," Mondes en développement, De Boeck Université, vol. 130(2), pages 77-93.
    4. Muhammad Khan, 2013. "Inflation and Sectoral Output Growth Variability in Bulgaria," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 55(4), pages 687-704, December.
    5. Nikolay Nenovsky & E. Peev & T. Yalamov, 2003. "Banks-Firms Nexus under the Currency Board: Empirical Evidence from Bulgaria," Post-Print halshs-00259830, HAL.
    6. Dalia Grigonyté, 2003. "Impact of Currency Boards on Fiscal Policy in Central and Eastern European Countries," Economic Change and Restructuring, Springer, vol. 36(2), pages 111-133, June.
    7. P. Chobanov & Nikolay Nenovsky, 2004. "Money market liquidity under Currency board - empirical investigations for Bulgaria," Post-Print halshs-00259753, HAL.
    8. Jean-Baptiste Desquilbet & Nikolay Nenovsky, 2004. "Credibility and Adjustment : Gold Standards versus Currency Boards," CAE Working Papers 11, Aix-Marseille Université, CERGAM.
    9. Nikolay Nenovsky, 2010. "The Bulgarian Economic Thought since 1989: A Personal View," ICER Working Papers 21-2010, ICER - International Centre for Economic Research.
    10. Moustapha Aman & Nikolay Nenovsky & Ismeal Mahamoud, 2014. "Le système informel de transferts de fonds et le mécanisme automatique du Currency Board : Complémentarité ou antagonisme ?," Working Papers halshs-01012133, HAL.
    11. Jérôme Blanc & Jean-François Ponsot, 2004. "Crédibilité et currency board : le cas lituanien," Revue d'Économie Financière, Programme National Persée, vol. 75(2), pages 113-127.
    12. Moustapha AMAN & Ismeal MAHAMOUD & Nikolay NENOVSKY, 2013. "Le système informel de transferts de fonds et le mécanisme automatique du Currency Board : complémentarité ou antagonisme ? Le cas des transferts des hawalas à Djibouti," LEO Working Papers / DR LEO 2249, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    13. Pazardjiev, Martin N. & Vasilev, Aleksandar Z., 2004. "Specificities of the Monetary Transmission Mechanism within the Bulgarian Currency Board Framework: The first five years," EconStor Research Reports 140616, ZBW - Leibniz Information Centre for Economics.


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