Dinosaurs monetary system


Currency board was born in the British Empire in the XIX century. After World War II, most of the newly formed government decided to change currency on the institutions of the central bank. However, in 1990 currency board back "from time immemorial" and became the monetary authorities in developing countries and countries with economies in transition. Until 2002, all over the world, there were about a dozen currency boards.

The differences from the classical model

That generally is a currency board? Monetary Authority is the agency issues the notes and coins that are readily convertible at a fixed rate to a foreign currency or other reserve assets.

Modern currency board differs significantly from its classical model, and therefore were born, terms such as "kvazivalyutnoe board", "modified currency board" and "unorthodox currency board." In the domestic press he is often referred to as "currency board", "currency board" or "House of the currency."

Early currency board anything other than transform the metropolitan currency (usually sterling) in local currency, were not engaged.

In the modern world functions of currency board have increased considerably. Changed political and economic landscape. Countries currently using currency board, are no longer colonies themselves ensure the stability of the national banking sector, the payment system and the international flow of capital.

In response to changes in the environment, today's currency board more like central banks, rather than on its predecessors. Rather, the monetary authorities in developing countries not only refused to institute tsentralnogo bank as adopted from the Monetary Board of the shape of the issue and circulation of money. From the classical point of view, the currency board holds only one operation: convert domestic money into a reserve currency at a predetermined exchange rate. However, current currency board expanded the range of operations. Now in it, in addition to foreign exchange transactions, including regulation of liquidity and lending to the banking sector.

Conversion operations

All currency board have an obligation to repurchase its liabilities, which include not only cash, but bank reserves. Last part of the obligations of boards because of the strategic importance of the interbank market and payment system for the stability of the monetary system. In contrast to passive operations of the assets in different countries are different. Not all of the board have a clear obligation to buy back the currency at the official rate.

For example, in Argentina, the central bank only recently able to buy foreign currency at the market, rather than the official rate. In Estonia, the monetary base is fully guaranteed by reserves, but it is unknown to what course should be conducted emissions. Currency boards of these two countries to legally operate in a dual exchange rate. In Hong Kong, the cash are bought and sold at the official rate, while bank reserves are redeemed at a fixed rate, and sold at market price. Bulgaria National Bank also maintains asymmetric rates: the anchor currency is sold at the official rate, and buy at a discount of 0.5%. Another interesting aspect is the range of conversion operations counterparties Monetary Board. Traditionally, government sign deals only with non-residents. In other words, the official exchange rate is only available for the interbank market and the retail market exchange rate is determined by the market.