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

Jakob de Haan, Helge Berger () and Erik Van Fraassen

LICOS Discussion Papers from LICOS - Centre for Institutions and Economic Performance, KU Leuven

Abstract: 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.

Keywords: currency board; central bank independence; Baltics (search for similar items in EconPapers)
JEL-codes: E58 E61 F31 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2001
New Economics Papers: this item is included in nep-ifn, nep-mac, nep-mfd, nep-mon, nep-rmg and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
http://www.econ.kuleuven.be/licos/publications/dp/dp96.pdf

Related works:
Journal Article: How to reduce inflation: an independent central bank or a currency board? The experience of the Baltic countries (2001)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lic:licosd:9601

Access Statistics for this paper

More papers in LICOS Discussion Papers from LICOS - Centre for Institutions and Economic Performance, KU Leuven Contact information at EDIRC.
Bibliographic data for series maintained by ().