publication . Article . 1992

The quest for sound money: currency boards to the rescue

Norman S. Fieleke;
Open Access
  • Published: 01 Jan 1992
Some countries with high inflation have adopted another nation’s more stable currency: Panama uses the U.S. dollar, gaining price stability and easier trade with its primary partner. But this arrangement grants an interest-free loan to the government whose currency is used. And the nation using the currency forgoes any income on the foreign currency holdings. ; One alternative, a currency board, achieves the other country’s monetary stability without these costs. Currency boards issue a domestic currency in return for the foreign currency, at a fixed exchange rate. Boards also hold assets denominated in the foreign currency that are at least equal in value--at a...
free text keywords: Money ; Currency boards ; Foreign exchange - Law and legislation

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