An Institutional Framework for Comparing Emerging Market Currency Boards

This paper offers an in-depth review of the institutional arrangements underlying existing currency boards (CBAs) in Argentina (until 2001), Eastern Europe, and Asia. An index of precommitment is derived from an analysis of legislative frameworks and monetary policy operations. The index covers features associated with monetary and exchange rate credibility such as: (i) clarity of legal basis, (ii) quality of reserve coverage, (iii) coverage of monetary aggregates, (iv) claims on reserves, (v) operational autonomy, (vi) transparency and accountability, and (vii) escape clauses. The paper concludes with a discussion of flexibility and credibility trade-offs and exit issues.Currency boards;Asia;Emerging markets;exchange rate, inflation, central bank, monetary policy, monetary fund, fixed exchange rate, exchange rate regime, money supply, monetary aggregates, monetary authorities, real exchange rate, exchange rate peg, national bank, monetary liabilities, monetary authority, liquidity management, monetary base, exchange rate regimes, exchange rates, monetary institutions, exchange rate depreciation, monetary aggregate, exchange rate policy, foreign exchange, exchange rate stability, fixed exchange rate regimes, hong kong monetary authority, exchange rate misalignment, exchange rate policies, fixed exchange rate regime, exchange rate flexibility, monetary framework, reserve requirements, exchange rate appreciation, money market, monetary policy operations, monetary target, monetary frameworks, monetary stabilization, reserve currencies, currency convertibility, monetary expansion, exchange rate pegs, hard currency, fixed exchange rates, money demand, future real exchange rate, real exchange rate appreciation, exchange rate mechanism, nominal exchange rate, exchange rate instability, monetary reform, exchange rate parity, exchange rate instrument, adjustable exchange rate, monetary dynamics, monetary policies, monetary assets, monetary targets, fixed exchange rate peg, currency areas, monetary conditions, exchange rate devaluation, exchange rate uncertainty, alternative exchange rate regime, exchange rate targets, monetary regimes, real exchange rate misalignment, monetary transmission mechanism, tight monetary stance, foreign exchange market, exchange rate arrangements, monetary systems, currency substitution, basket of currencies, monetary management, monetary anchor, intermediate monetary target, expansionary monetary policy, monetary economics, money markets, flexible exchange rate, domestic government securities, monetary policy instrument, currency risk, treasury securities, monetary stability, monetary stance, monetary transmission, monetary policy discretion, flexible exchange rate regime, government securities, alternative exchange rate, discretionary monetary policy, real exchange rate depreciation