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.
|Date of creation:||2001|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +32 (0) 16 / 32 6598
Fax: +32 (0) 16 / 32 6599
Web page: http://www.econ.kuleuven.be/licos
More information through EDIRC
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.:
- 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.
- 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.
- 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.
- 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,.
- Eijffinger, S. & De Hann, J., 1995. "The Political Economy of Central Bank Independence," Papers 9587, Tilburg - Center for Economic Research.
- 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.
- 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.
- 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.
- 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.
- Eijffinger, Sylvester & Haan, Jakob de, 2000.
"European Monetary and Fiscal Policy,"
Oxford University Press, number 9780198776161.
- John Williamson, 1995.
"What Role of Currency Boards?,"
Peterson Institute Press: All Books,
Peterson Institute for International Economics, number pa40.
- John Williamson, 1995. "What Role of Currency Boards?," Peterson Institute Press: Policy Analyses in International Economics, Peterson Institute for International Economics, number pa40, February.
- 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.
- 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 381-99, 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.).
- Fleming, Alex & Talley, Samuel, 1996. "The Latvian banking crisis : lessons learned," Policy Research Working Paper Series 1590, The World Bank.
When requesting a correction, please mention this item's handle: RePEc:lic:licosd:9601. 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: ()
If references are entirely missing, you can add them using this form.