ABSTRACT
The Lithuanian case will prove an interesting test of the usefulness of currency boards in transitional economies. For the Baltic states in particular, introducing national currencies at first seemed to be the best way to escape from the ruble zone. The experience of the Baltic states shows that at least some of the necessary preconditions can be developed after introducing a national currency, especially if a critical mass of the most fundamental elements of monetary reform are in place from the start. The peg compels the country to pursue stringent monetary and fiscal policies aimed at maintaining the exchange rate. Like other former Soviet Union nations, the Baltic states faced important handicaps as they started to build their national monetary systems. The move to a currency board came after a lengthy period of gradualist monetary reform, when inflation was finally subsiding and the dollar exchange rate had been stable for several months.
