ABSTRACT
The recent global financial turmoil has changed the currency board from a relatively obscure and unstudied monetary regime to an exchange rate system that has attracted widespread attention. It has been recommended as the definitive solution to stabilize the currency and the economy in Mexico, Indonesia, Russia and Brazil. Part of the enthusiasm may be due to its property of having a stable exchange rate. Its smooth adoption in a number of countries, notably Argentina (1991), Estonia (1992), Lithuania (1994) and Bulgaria (1997) must have also created greater confidence in the system.1 If the renewed interest could be sustained and more countries were to adopt currency boards eventually, then as Schwartz (1993) had commented, ‘a watershed would have been reached in the annals of political economy’.
