Institutional arrangements of Currency Boards - Comparative Macroeconomic Analysis

Abstract

This paper is concentrated on the comparative macroeconomic analysis of the differences stemming from the extent to which the institutional framework of the currency board arrangement is implemented in the legal and regulatory systems in the different countries.

The main objective of taking into consideration and examining the currency board institutional arrangements is to distinguish between the impact that currency board countries and  countries with pegged exchange rate have on different macroeconomic indicators. During the analysis of these two extreme representatives of the fixed exchange rate mechanism, a third group of countries naturally emerges, which consists of countries acting like currency boards but without official, legal implementation of this arrangement. Once the distinction among all 22 countries taken into consideration had been made, the main scope of the analysis concentrates on the econometric estimation of the currency boards' effects over inflation, nominal and real interest rates and economic growth in countries under currency board and all other pegged exchange rate economies.