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Factors Inhibiting Deflationary Bias In Currency Board Economies: Evidence From The Colonial Era

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  • Malcolm Treadgold

Abstract

A traditional criticism of currency boards is that they impart a deflationary bias to growing economies. Three factors, however, may inhibit the bias: increases in the velocity of money; increases in the monetary base, which under a currency board occur only through balance‐of‐payments surpluses; and increases in the money multiplier. This article investigates each of the factors in Fiji, Ghana, Jamaica and Malaya over various periods near the end of the colonial era. Except in Malaya, where the money multiplier declined, all helped prevent deflationary outcomes. In broad terms, growth in the monetary base was the most important.

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  • Malcolm Treadgold, 2006. "Factors Inhibiting Deflationary Bias In Currency Board Economies: Evidence From The Colonial Era," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 46(2), pages 130-154, July.
    • Handle: RePEc:bla:ozechr:v:46:y:2006:i:2:p:130-154
    DOI: 10.1111/j.1467-8446.2006.00167.x
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    Cited by:

    1. Krus, Nicholas, 2012. "The Money Supply in Currency Boards," Studies in Applied Economics 3, The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise.

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