EconPapers    
Economics at your fingertips  
 

On the Credibility of Currency Boards*

Switgard Feuerstein () and Oliver Grimm ()

Review of International Economics, 2006, vol. 14, issue 5, 818-835

Abstract: The paper compares the credibility of currency boards and (standard) pegs. Abandoning a currency board requires a time‐consuming legislative process and an abolition will thus be well‐anticipated. Therefore, a currency board solves the time‐inconsistency problem of monetary policy. However, policy can react to unexpected shocks only with a time lag, thus the threat of large shocks makes the abolition more likely. Currency boards are more credible than standard pegs if the time‐inconsistency problem dominates. In contrast, standard pegs, that can be left at short notice, are more credible if exogenous shocks are highly volatile and constitute the dominant problem.

Date: 2006
References: View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.1111/j.1467-9396.2006.00621.x

Related works:
Working Paper: On the Credibility of Currency Boards (2004) Downloads
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:bla:reviec:v:14:y:2006:i:5:p:818-835

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0965-7576

Access Statistics for this article

Review of International Economics is currently edited by E. Kwan Choi

More articles in Review of International Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2021-03-28
Handle: RePEc:bla:reviec:v:14:y:2006:i:5:p:818-835