ABSTRACT
In conclusion, it is natural to think of a new Palestinian state with its own currency. This comment has been sceptical about the suggestion of a currency board with the NIS which could be quite risky. The development of institutions, especially in the fiscal and supervisory areas, is needed anyway and would be needed to support the adoption of a separate currency with or without a currency board. With successful institutional development, a number of options for the monetary and exchange rate arrangements would open up (including, in principle, inflation targeting with a floating exchange rate, or various kinds of fixed or semi-fixed exchange rates). Without the appropriate institutional arrangements, not only would the options be much more limited, but the adoption of particular exchange rate arrangements could be risky.
