Le Currency board: les contraintes de financement et d'ajustement de la convertibilité intégrale

Jean-François Ponsot
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Jean-François Ponsot: LATEC - Laboratoire d'Analyse et de Techniques Economiques [UMR 5118] - UB - Université de Bourgogne - CNRS - Centre National de la Recherche Scientifique

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Abstract: The paper scrutinizes the consequences of the adoption of a currency board arrangement (CBA) by some emerging economies during the 1990s. Considering the justifications o f this choice and the different setting-up contexts, it focuses on the implications of a CBA on the financial system and the real economy. A high degree of liquidity of the banking system is required in the absence of a lender-of-last-resort, and the automatic money supply process strictly disciplines the fiscal policy. Monetary stability is restored; but in most o f these economies where capital markets are underdeveloped, CBA's rules make the domestic credit supply dependent on the ability o f the economy to maintain over the time net flows o f the reserve currency, and so set up a precarious growth dynamics. When it is not so (Bulgaria), CBA brings about stagnation. When this is the case, the growth rate can be high but not regular in the medium term. Indeed CBA prevents the use of an exchange rate change and precludes the active u se of monetary policy (interest rates setting) to stabilize the domestic economy. So, the adjustment rests on the ability of the real sector and o f the labour market to absorb exogenous shocks. High unemployment persistence in Argentina and in Estonia shows that the process can be costly and painful. To limit these negative effects, some forms of lender-of-last-resort functions and discretionary power are sometimes established, but these new arrangements alter currency board principles and weaken the monetary credibility.

Keywords: currency board; central bank; supply of money and credit; base money; monetary policy; foreign exchange rate; emerging economies; caisse d'émission; banque centrale; offre de monnaie; base monétaire; politique monétaire; taux de change; contrainte d'ajustement; économies émergentes (search for similar items in EconPapers)
Date: 2000-09
Note: View the original document on HAL open archive server: https://hal.science/hal-01527297v1
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Published in [Rapport de recherche] Laboratoire d'analyse et de techniques économiques(LATEC). 2000, 22 p., figures, bibliographie

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