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This work examines the challenges facing East European countries, their economic policies and the main challenges to economies adopting currency boards.

Currency boards --- Financial institutions --- Monetary policy --- Europe, Eastern --- Economic policy

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The “hollowing-out,” or “two poles” hypothesis is tested in the context of a Markov chain model of exchange rate transitions. In particular, two versions of the hypothesis—that hard pegs are an absorbing state, or that fixes and floats form a closed set, with no transitions to intermediate regimes—are tested using two alternative classifications of regimes. While there is some support for the lack of exits from hard pegs (i.e., that they are an absorbing state), the data generally indicate that the intermediate cases will continue to constitute a sizable proportion of actual exchange rate regimes.

Foreign Exchange --- International Monetary Arrangements and Institutions --- Currency --- Foreign exchange --- Exchange rate arrangements --- Conventional peg --- Exchange rates --- Currency boards --- Crawling peg --- Trinidad and Tobago

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Money. Monetary policy --- Economic geography --- European Union --- Monetary policy --- Monetary unions --- Politique monétaire --- Unions monétaires --- European federation --- -Monetary unions --- -Monetary policy --- -European federation --- 332.4566094 --- Common currencies --- Currency areas --- Currency unions --- Optimum currency areas --- Currency question --- Money --- Monetary management --- Economic policy --- Currency boards --- Money supply --- Federation of Europe --- Pan Europa movement --- Paneuropean federation --- United States of Europe (Proposed) --- Federal government --- Regionalism (International organization)

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This paper shows that extending the convertibility guarantee of the traditional currency board to a second reserve currency brings about an automatic, market-driven change of the peg when the initial reserve currency appreciates beyond a specified level. The “dual” currency board thus maintains the advantages of a hard peg, but avoids the economic difficulties associated with the link to an overvalued reserve currency. As an added benefit, the system has the potential to promote global currency stability, with the reserves of the dual currency board country acting as a buffer stock to the exchange cross-rate of the chosen reserve currencies.

Foreign Exchange --- Money and Monetary Policy --- Central Banks and Their Policies --- International Monetary Arrangements and Institutions --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Monetary economics --- Currency --- Foreign exchange --- Currency boards --- Reserve currencies --- Currencies --- Exchange rates --- Conventional peg --- Money --- United States

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We analyze the costs and benefits of full dollarization compared to its closest alternative, a currency board, quantifying for Argentina where possible. Potential advantages include lower borrowing costs and deeper integration into world markets. One cost is the transfer of seigniorage to the United States. The country may also lose the “exit option” to devalue in the face of major shocks. Similarly, even a country with a currency board may lose some ability to act as lender of last resort to the banking system. We review how various country characteristics influence the balance of arguments.

Financial Risk Management --- Foreign Exchange --- Macroeconomics --- Money and Monetary Policy --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Financial Crises --- Monetary economics --- Economic & financial crises & disasters --- Currency --- Foreign exchange --- Currencies --- Dollarization --- Currency crises --- Financial crises --- Currency boards --- Money --- Monetary policy --- United States