Macroeconomics Case Study

Currency Boards and Countries’ Experiences

OR

Abstract:
The system of currency boards originated in Britain in the 1800s. Soon the concept of currency boards spread among the British colonies in Africa, Asia, the Caribbean and the Pacific Islands. In the 1990s, this system was introduced in those countries, which were troubled by high inflation and financial instability. But gradually, the currency boards were replaced by the central banks. By 2002, 174 countries had established their own central banks. However, other countries like Hong Kong, Estonia and Lithuania continued to have currency boards and they did not permit any monetary policies.

Pedagogical Objectives:

• To discuss the mechanism of currency boards of different countries
• To discuss the differences between the central bank and the currency board arrangement.

Keywords : Currency board system, Foreign currency assets, Issue department, Convertibility system, Bank of England, Hong Kong Monetary Authority, Linked exchange rate system, European Union, Current account deficit, Monetary Policy Case Study, Floating exchange rate system, Banking supervision department, Open market operations, Monetary policies, Lender of the last resort, Central bank