An alternative to a central bank, often established in response to economic turmoil. A currency board, which generally includes some foreigners, replaces the central bank and sets a fixed exchange rate. Argentina instituted a currency board in April 1991, creating a new peso worth $1 and requiring the government to hold enough dollars in reserves so that every peso could be exchanged for a dollar. The move drastically cut inflation and also restored Argentina's ability to borrow money at reasonable interest rates. However, currency boards effectively strip a nation of the power to control its own economy. Economic factors such as wages, interest rates, the balance of payments, even rents, adjust to the fixed exchange rate.
a central bank whose monetary policy is a special case
a form of monetary constitution that prevents the domestic government from abridging economic freedoms by levying a high inflation tax not desired by the public
a legislated method to provide greater assurances that an exchange rate fixed to a reserve currency will indeed remain fixed
a mechanism that fixes an exchange rate by having the government support a predetermined rate of exchange between their country and another country with a desirable stable currency
a monetary authority that issues notes and coins convertible into a foreign anchor currency or commodity (also called the reserve currency) at a truly fixed rate and on demand
a monetary authority that issues notes and coins in exchange for a reserve currency, example the U
a monetary authority with a mandate to issue domestic currency that can be exchanged for the foreign reserve currency on demand at a fixed exchange rate
a monetary institution that issues notes and coins (and, in some cases, deposits) fully backed by a foreign "reserve" currency and fully convertible into the reserve currency at a fixed rate and on demand
an institution that issues notes and coins convertible on demand and at a fixed rate into a foreign currency or other external "reserve" asset
a special fixed exchange rate where Despite some market expectations to the contrary, China unveiled no dramatic foreign-exchange news in conjunction with President George W
a system by which a currency is convertible at a fixed exchange rate with another currency
A monetary system in which the monetary base is fully backed by foreign reserves. Any changes in the size of the monetary base has to be fully matched by corresponding changes in the foreign reserves.
Currency boards are government institutions that regulate a nation's domestic money supply and its foreign exchange rate. The goal of a currency board is to use the commitment to a fixed foreign exchange rate as a tool to stabilize the domestic economy.
A monetary authority that pledges to maintain a fixed value for a local currency relative to a foreign currency by exchanging local notes for foreign notes at a set exchange rate. The amount of local notes and coins in circulation is backed up 100% by foreign notes and coins in reserves.
Under a currency board arrangement, expansion or contraction of a country's money would be undertaken in a strict relationship with changes in foreign exchange reserves. In the context of a Canada-U.S. currency relationship, a currency board would likely involve the transformation of the Bank of Canada into a currency board that would exchange its Canadian dollar liabilities for U.S. dollars at a fixed rate. As reserves, the currency board would hold high-quality interest-bearing securities denominated in the reserve currency (U.S. dollars). Dollarization: Dollarization is the term used to describe the situation where one country uses another currency in place of its own. In the context of this summary, it refers to Canada using U.S. dollars and coins as the currency of everyday usage. Prices and wages, for example, in Canada would be set in U.S. dollars.
A currency board is a monetary authority that issues notes and coins convertible into a foreign anchor currency (the reserve currency) at a fixed rate on demand. Usually, a currency board does not accept deposits, however in cetain circumstances it may accept those backed by 100 percent by external reserves. As reserves, the currency board holds high-quality, interest-bearing securities and other low risk assets denominated in the anchor currency. Its reserve ratio is fixed at 100 percent or slightly higher of its notes and coins in circulation, as set by law. Profits to the currency board are dervived from the spread between the interest on securities that it holds and the expense of maintaining its notes and coins in circulation. The currency board remits to the government all profits beyond what it needs to pay expenses and maintain its reserve ratio. Market forces determine the quantity of notes and coins in circulation as the currency board has no discretion in monetary policy.
