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"Currency Board" Homepage
"Para Kurulu" Web Sayfası

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What is a currency board?
John Williamson:
A currency board is an arrangement under which a country fixes its exchange rate and maintains 100 percent backing of its money supply with foreign exchange.
Source: http://www.iie.com/PRESS/cboard.htm
John Williamson:
A currency board has normally been used to hold a fixed exchange rate vis-à-vis some major international currency, which we will call the reserve currency. In principle, one could allow for a certain element of variability in the exchange rate, at least a preannounced decelerating crawl intended to wind down inflation gradually (as will be discussed later). Similarly, it would be possible to fix the exchange rate in terms of a basket rather than of one currency. But the general practice of currency boards has been to hold a rigidly fixed exchange rate in terms of a single reserve currency, and most advocates of currency boards take it for granted that is the right policy. Hence the main analysis assumes a fixed exchange rate in terms of the reserve currency. 
A currency board is defined as a monetary institution that issues base money solely in exchange for foreign assets, specifically the reserve currency. Base money consists of notes and coin ("cash," for convenience), and may also include the other reserves, or some of the other reserves, held by commercial banks. Under a currency board system, however, unlike the practice when a country has a central bank, the commercial banks may be allowed, or even required, to hold much or all of their reserves (other than vault cash) in the form of the reserve currency. 
Source: http://www.iie.com/CATALOG/CURRENCY/chpa40.htm
Kurt Schuler:
A currency board is 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. An orthodox currency board typically does not accept deposits. A currency board can operate in place of a central bank or as a parallel issuer alongside an existing central bank; cases of parallel issue have been quite rare, though.
Source: http://users.erols.com/kurrency/intro.htm
Kurt Schuler:
A currency board is an institution that issues notes and coins convertible on demand and at a fixed rate into a foreign currency or other external "reserve" asset. Ordinarily, a currency board does not accept deposits, though in certain cases it may accept those backed 100 percent by external reserves. As reserves, it holds high-quality, interest-bearing securities denominated in the reserve asset. Its reserve ratio is fixed at 100 percent or slightly more of its notes and coins in circulation, as set by law. The currency board makes profits from the difference between the interest on the securities that it holds and the expense of maintaining its note and coin circulation. It remits to the government all profits beyond what it needs to pay expenses and maintain its reserve ratio. The currency board has no discretion in monetary policy; market forces alone determine the quantity of notes and coins in circulation.
Source: http://users.erols.com/kurrency/webdiss1.htm
Anne-Marie Gulde:
A currency board combines three elements: a fixed exchange rate between a country's currency and an "anchor currency," automatic convertibility, and a long-term commitment to the system, often made explicit in the central bank law. The main reason for countries to consider a currency board is to demonstrate that they are pursuing an anti-inflationary policy.
Source: http://www.imf.org/external/pubs/ft/fandd/1999/09/gulde.htm
Michael Devereux:
A currency board is defined as a monetary institution that issues base money fully backed by a foreign "anchor" or reserve currency, and fully convertible into the reserve currency at a fixed rate on demand.
Source: http://teaching.ust.hk/~econ112/currboard.htm
N. Bülent Gültekin & Kâmil Yılmaz:
A currency board is 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. By following rigid money supply rules, the orthodox currency board severely restricts the power of the government on monetary policy. The monetary base increases only when the private sector sells foreign exchange to the board at a fixed rate to meet its demand for national currency, and it decreases when the private sector buys foreign exchange from the board to finance a balance of payments deficit. The board cannot conduct monetary policy by changing the monetary base with traditional tools of monetary policy, such as open market operations and/or credit extension to private or public sector. Under currency board system, the government cannot monetize budget deficits.
Source: http://home.ku.edu.tr/~kyilmaz/papers/parakurf.pdf
Introductions by: / Kurt Schuler / John Williamson / Michael Devereux

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Kurt Schuler: "Currency Boards and Dolarization: Information on the Currency Board System, Dollarization, and Related Topics",
Steve H. Hanke: "His Recent Articles related to Currency Board System",
Mark Bernkopf: "Central Banking Resource Center: Currency Boards",
Nouriel Roubini: "The Debate on Currency Boards", "Dollarization" and "Current Financial Issues in Turkey"
A Group of Economic Researchers from Bulgaria: "Euroization in Bulgaria",
Aykut Kibritçioğlu: "Currency Board Homepage",
The World Bank: "Dollarization",

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Papers, Books, News, etc.
Anna J. Schwartz (1992): Do Currency Boards Have a Future?, The Institute of Economic Affairs, Occasional Paper 88 (Twenty-Second Wincott Memorial Lecture), London.
Looks at the role of currency boards, especially for stabilising the newly free economies of Eastern Europe. A skeptical look at the political feasibility of currency boards, written before most of the recent currency board-like systems were established
A. Walters (1992): Currency BoardsJohns Hopkins University, Department of Economics, WP Series, No. 281.
Kurt Schuler (1992): Currency Boards, Dissertation, George Mason University, Fairfax, Virginia.
Anna J. Schwartz (1993): "Currency Boards: Their Past, Present, and Possible Future Role", Carnegie Rochester Conference Series on Public Policy, Vol. 39.
Kent Osband & Delano Villanueva (1993): "Independent Currency Authorities: An Analytic Primer", IMF Staff Papers, 40/1: 202-216.
Nissan Liviatan (ed.) (1993): Proceedings of a Conference on Currency Substitution and Currency Boards, World Bank Discussion Paper 207.
Steve H. Hanke & Kurt Schuler (1994): Currency Boards for Developing Countries: A Handbook. San Francisco: ICS Press.
A simple discussion of the case for currency boards and how to establish them in developing countries. 
Adam G. Bennett (1994): Currency Board Arrangements: Issues and Experiences, IMF Papers on Policy Analysis and Assesment 94/18.
Owen F. Humpage & Jean M. McIntire (1995): An Introduction to Currency Boards, Federal Reserve Bank of Cleveland's Economic Review, 31/2/: 2-11.
A look at the pros and cons of currency boards as an institution for providing monetary credibility in developing countries.
John Williamson (1995): What Role for Currency Boards? Washington: Institute for International Economics.
To help overcome its financial crisis, Russia is being urged to create a currency board, which has met with success in other countries such as Argentina, Estonia, and Hong Kong. This study explains what a currency board is and how it differs from a central bank, and examines the advantages and disadvantages of each type of arrangement. The author concludes that currency boards may be quite attractive to small, open economies and a useful prop in those emerging from a very deep macroeconomic crisis, but that their disadvantages outweigh these attractions in most large countries.
Asaf Savaş Akat (1995): "Paranın Değeri", Sabah Gazetesi, 25.6.1995.
N. Bülent Gültekin & Kâmil Yılmaz (1996): Para Kurulu: Nedir? Ne Zaman Gerekir?, İstanbul: TESEV, Yay. No. 6.
Almira Karasoy (1996): Para Kurulu Sisteminin Uygulanması, Ankara: TCMB Tartışma Tebliğleri.
Mutlu Yıldırım (1996): "Currency Board Sistemi", Başak Dergisi, 19(89): 28-33.
Asaf Savaş Akat (1996): "Yeni Lira", Sabah Gazetesi, 1.12.1996.
Guillermo E. Perry (ed.) (1997): Currency Boards and External Shocks: How Much Pain, How Much Gain?, Washington, DC: Worldbank.
Tomás Baliño, Charles Enoch, Alain Ize, Veerathai Santiprabhob, and Peter Stella (1997): Currency Board Arrangements: Issues and Experiences, IMF Occasional Paper 151.
K. Schuller: "Focuses on recent experience. Has many interesting details, but like other publications from the IMF, it fails to distinguish between currency boards and currency board-like systems. Also, it compares the performance of currency boards and central banks haphazardly rather than systematically."
Charles Enoch & Anne-Marie Gulde (1997): Making a Currency Board Operational, IMF Paper on Policy Analysis and Assessment 97/10. [PDF]
The Economist (1997): "Economics Focus: The ABC of a Currency Board", 1 November 1997, p.80.
Asaf Savaş Akat (1997): "En Doğrusu 'Yeni Lira = Avro' ", Sabah Gazetesi, 28.9.1997.
Nouriel Roubini (1998): The Case Against Currency Boards: Debunking 10 Myths about the Benefits of Currency Boards, Stern School of Business, New York University, February 1998.
Asaf Savaş Akat (1998): Para Kuruluna Geçelim, Para Dergisi, 15.2.1998.
James Tobin (1998): Financial Globalization: Can National Currencies Survive?, paper prepared for the Annual World Bank Conference on Development Economics, Washington, D.C., April 20-21, 1998. [PDF]
Fixed exchange rate, pegs to hard currencies that can be adjusted, are fragile, the more so the more mobile are capital funds across currencies and national markets. Once market participants doubt, for whatever reason, the ability of a developing or emerging economy's central bank to meet its commitment to redeem it currency in hard currency at the promised rate, they will race to claim the country's external reserves. Vulnerability to crises becomes greater as financial markets become less regulated and more internationally open. To escape currency crises, a country may lock its money to that of a reserve-currency country, as by a "currency board." This may, if an only if reserves are ample and all other economic objectives are subordinated, maintain the peg and hold down inflation. But it sacrifices monetary autonomy and seignorage,  leading in effect and perhaps literally to substitution of the reserve currency for the local currency as unit of account and means of payment. When crises hit, the IMF and other lenders give highest priority to restoration of credibility and confidence in the currency under attack. They require the victim country to take drastic restrictive monetary and fiscal measures, whether or not irresponsibility in these policies brought on the crisis. Since these measures damage the economy, businesses, and banks, they may not restore confidence. Lenders of last resort are essential and should concentrate above all on replenishing liquidity. The adjustable-peg system has outlived its usefulness. For most countries it is better to let exchange rates float in markets, like those of the big three currencies, dollar, yen, and deutsche mark (or euro). Even so, unimpeded inflows and outflows of liquid funds result in unwelcome exchange rate movements. Protection against them, by taxes or special reserve requirements, are desirable, and need not curtail useful capital flows. Banks and businesses need to be prevented from incurring net short term debt positions in hard currency. Equity and direct fixed capital are the desirable vehicles for developmental capital movements.
Kurt Schuler (1998): "No More Central Banks: How to Prevent a Currency Crisis". Journal of Commerce, May 18, 1999.
Asaf Savaş Akat (1998): Para Kurulu Spekülatif Saldırıları Engeller, Para Dergisi, 31.5.1998.
Asaf Savaş Akat (1998): " 'Yeni Lira'nın Kaçınılmaz Gelişi", Para Dergisi, 28.6.1998.
"Dosya: Para Kurulu Sistemi", Ankara Sanayi Odası Asomedya Dergisi, Temmuz 1998.
Atish R Ghosh, Anne-Marie Gulde & Holger C. Wolf (1998): Currency Boards: The Ultimate Fix?, IMF Working Paper WP/98/8. [PDF]
In recent years, currency board arrangements have gained increasing popularity. Yet, relatively little is known about their macroeconomic performance. This paper compares inflation and output growth in countries with currency boards to countries with other, less extreme forms of exchange rate peg. 
Compared to other pegged exchange rates, average inflation under currency boards is about 4 percentage points lower. Some of this may be attributed to the greater monetary discipline under such arrangements. The bulk of the difference, however, is explained by the greater confidence engendered by adopting a currency board. This confidence effect raises money demand, and results in lower inflation for a given growth rate of the money supply. The findings are robust to potential endogeneity of the regime choice, whereby countries with a greater proclivity toward low inflation may be more likely to adopt a currency board.
On average, countries with currency boards actually grew faster than countries  with either pegged exchange rates or floating exchange rates. While it is unlikely that this growth performance can be explained by the exchange rate regime alone, the opposite proposition.that currency boards lead to more sluggish growth.receives no support from the data.
The Economist (1998): "By the Board", September 5, 1998.
Charles Enoch & Anne-Marie Gulde (1998): Are Currency Boards a Cure for All Monetary Problems?, IMF Finance & Development, December 1998, Volume 35, Number 4.
Currency board arrangements may be coming back into fashion. What recent successes have countries had with currency boards and in what circumstances are they most likely to be effective?
Andreas Freytag (1998): Getting Fit for the EU: A Currency Board for Poland?, paper presented at the conference on "The EMU and the Outside World", KOF/ETH Zurich, December 11, 1998.
Asaf Savaş Akat (1998): "Para Kurulu Çözüm Olabilir", Sabah Gazetesi, 13.12.1998.
Jennifer Evetts (199?): "Class Notes for Currency Boards Project".
Anne-Marie Gulde (1999): The Role of the Currency Board in Bulgaria's Stabilization, IMF Policy Discussion Papers PDP/99/3. [PDF]
Steve H. Hanke (1999): "How to Make the Dollar Argentina’s Currency". The Wall Street Journal, February 19, 1999.
Ateşan Aybars (1999): "Para Birimleri Coğrafyası ve Dolarizasyon", Dünya Gazetesi, 24.2.1999.
Fatih Özatay (1999): "Sabitlesek De Mi Saklasak", Radikal Gazetesi, 15.3.1999.
Fatih Özatay (1999): "Doğru Döviz Kuru Sistemi Var mı?", Radikal Gazetesi, 17.3.1999.
Richard W. Koepcke (1999): Currency Boards: Once and Future Monetary Regimes?, Federal Reserve Bank of Boston's New England Economic Review, May-June 99: 21-37. [PDF]
A currency board can allow a developing economy to establish its domestic currency relatively promptly and efficiently by fixing the value of its currency to that of another country and guaranteeing that its currency is backed by sufficient foreign exchange reserves. Currency boards not only provide a foundation that encourages traders and investors to accept new currencies, they also do not require sophisticated money markets and central banking operations in order to be effective. Because of these attributes, currency boards have attracted more attention, particularly in the wake of recent global financial crises, from developing countries in Asia, Latin America, and Europe that have either introduced new currencies or want to restore confidence in their currencies. The author reviews the design of currency boards, the choice of reserve currency and exchange rate, and the role of a currency board in fiscal and monetary policy. He concludes that while currency boards can provide a foundation for new currencies, these boards alone cannot ensure success. Although a board guarantees the backing of its base money, faith in its currency rests on traders' and investors' confidence in the economy's financial institutions, capital markets, and fiscal management. Although a board might cause its economy to import a reputable monetary policy, it cannot ensure that this policy suits its economy's needs. Currency boards represent a start, more than a destination, for the design of monetary authorities, the author concludes.
Carlos E. J. M. Zarazaga (1999): "Building a Case for Currency Boards", Pacific Economic Review, 4/2: 139-163.
Two common objections to currency boards are that they are dominated by more flexible policies and that they are unsustainable. The paper confronts these objections with the insights from a model economy in which several constituencies who compete for subsidies do not have the ability to monitor the allocation of government spending. Such assumptions are meant to capture important features of the reality of many countries for which currency boards have been proposed. The model suggests that, in such environments, flexible policies in a certain class have an inflationary bias that a sustainable currency board can - but not necessarily - eliminate.
Iikka Korhonen (1999): "Currency Boards in the Baltic Countries: What Have We Learned?", BOFITDiscussion PapersNo 6 / 1999.
Asaf Savaş Akat (1999): "Bulgaristan'da Para Kurulu", Para Dergisi, 6.6.1999.
Asaf Savaş Akat (1999): "1 Leva = 222.634 TL", Sabah Gazetesi, 8.7.1999.
Aclan Acar (1999): "Para Kurulu'na Geçmek Hata Olur", Hürriyet Gazetesi, 10.7.1999.
Asaf Savaş Akat (1999): "Para Kurulu Çözümdür", Sabah Gazetesi, 11.7.1999.
Salih Neftçi (1999): "Bizde Olur Mu?", Star Gazetesi, 16.7.1999.
Deniz Gökçe (1999): "Yeni kurban: Arjantin ve Cavallo!", Akşam Gazetesi, 7.8.1999.
Ercan Kumcu (1999): "Ekonomide Tuzaklar", Hürriyet Gazetesi, 7.8.1999.
Anne-Marie Gulde (1999): The Role of the Currency Board in Bulgaria's Stabilization, IMF Finance & Development, September 1999, Volume 36, Number 3.
Bulgaria's latest stabilization program, which included the introduction of a currency board, marked the end of a period of economic turmoil and near-hyperinflation. What accounts for its success?
Haydar Akyazı (1999): Para Kurulu ve Türkiye'de Uygulanabilirliği Üzerine Bir Araştırma, İstanbul: Türkiye Bankalar Birliği (The Banks Association of Turkey), Yayın No. 214.
Hikmet Uluğbay: "Para Kurulundan Zorla Vazgeçirdik", Milliyet Gazetesi, 25.11.1999.
Aykut Kibritçioglu (2000): "2000-2002 Enflasyonla Mücadele ve Yeniden Yapılanma Programının Döviz-Kuruna-Dayalı Diğer İktisat Politikası Uygulamalarından Farklılıkları", http://dialup.ankara.edu.tr/~kibritci/program.html, Mayıs 2000.
Asaf Savaş Akat (2000): "Para Politikasını Tartışıyoruz", Para Dergisi, 13.8.2000.
Steve H. Hanke, " The Disregard for Currency Board Realities," Cato Journal, 20/1, Spring/Summer 2000.
Deniz Gökçe (2001): "Hangi Döviz Kuru Sistemi Uygulanmalı?", Platin Dergisi, 1.2.2001.
İbrahim Kıbrızlı (2001): "3. Kriz Reçetesi", Zaman Gazetesi, 24.2.2001.
Asaf Savaş Akat (2001): "Kur Politikası Tercihleri", Para Dergisi, 11.3.2001.
Altuğ Karamenderes (2001): "Para Kurulunun Ucu Göründü", ntv-MS-nbc, 9.4.2001.
Deniz Gökçe (2001): "Bulgaristan'dan Utanmamız gerek!", Akşam Gazetesi, 10.4.2001.
Faruk Selçuk (2001): "Para Kurulu Kaçınılmaz! - - Merkez Bankası’nı Kapatın Gitsin!", ntv-MS-nbc, 10.4.2001.
Yarkın Cebeci (2001): "Para Kuruluna Karşı Bir Yazı", ntv-MS-nbc, 11.4.2001. 
Deniz Gökçe (2001): "Bankacılık-Bulgaristan-Türkiye!", Akşam Gazetesi, 11.4.2001. 
İbrahim Kıbrızlı (2001): "Arrivederci Cottarelli...", Zaman Gazetesi, 11.4.2001. 
Sema Kalaycıoğlu (2001): "Para Kurulu - Yeni Bir KİT Mi Olur?", Finansal Forum Gazetesi, 26.4.2001.
Steve H. Hanke ve Kurt Schuler (2001): "Gelişmekte Olan Ülkeler İçin Para Kurulları ". Ankara: Liberal Düşünce Topluluğu.
Erhan Aslanoğlu (2001): "Para Kurulu İstikrarı Sağlar mı?", ntv-MS-nbc, 14.7.2001.
Nejla Adanur Aklan (2001): Para Kurulu Fiyat İstikrarının Sağlanmasında Alternatif Bir Kurum Olabilir mi?, Bursa: Uludağ Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, Cilt: 19, Sayı: 4, Aralık.
Haydar Akyazı (2002): Alternatif Parasal Rejimlerde Fiyat İstikrarı: Enflasyon Hedeflemesi ve Para Kurulu Örnekleri, İktisat, İşletme ve Finans Dergisi, Ankara: , Ocak 2002, Yıl 17, Sayı 190.
Aziz Kutlar and Salih Barışık (2002): An Econometric Inquiry About the Feasibility of a Currency Board System in Turkey, Russian and East European Finance and Trade, January-February, 38/1: 87-101

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