How to Reduce Inflation: An Independent Central Bank or A Currency Board? The Experience of the Baltic Countries

Arbeitspapier

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 nfirmative 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 intfirmediate case. Some policy recommendations and the problem of exit strategies towards the Euro zone are discussed.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: LICOS Discussion Paper ; No. 96

Classification and Topics

• Classification: Wirtschaft ; Central Banks and Their Policies ; Policy Objectives; Policy Designs and Consistency; Policy Coordination ; Foreign Exchange
• Subject: currency board ; central bank independence ; Baltics ; Currency Board ; Zentralbankautonomie ; Inflationsbekämpfung ; Nordosteuropa

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): de Haan, Jakob ; Berger, Helge ; van Fraassen, Erik
• Event: Veröffentlichung
• (who): Katholieke Universiteit Leuven, LICOS Centre for Transition Economics
• (where): Leuven
• (when): 2001

Further information

• Handle: http://hdl.handle.net/10419/74979
• Last update: 10.03.2025, 11:42 AM CET