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A Proposal on How to Introduce a Currency Board Based Monetary System in the Republic of Latvia

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  • J Rostowski

Abstract

Latvia is considering adopting a convertible currency which would be highly backed and which would be administered by a currency board. The problem is that with a tiny proportion of national income generated by trade with convertible currency countries this would require a huge initial undervaluation of the new domestic currency (the Lat), which would be highly stagflationary. The introduction of a bi-paper standard, with the Lat as a fully backed second currency circulating in parallel with the rapidly inflating Latvian ruble, avoids these costs. The advantages of such a system for revolutionary banking sector reform are also described.

Suggested Citation

  • J Rostowski, 1992. "A Proposal on How to Introduce a Currency Board Based Monetary System in the Republic of Latvia," CEP Discussion Papers dp0083, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp0083
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    Cited by:

    1. J Rostowski, 1993. "Creating Stable Monetary Systems in Post-Communist Economies," CEP Discussion Papers dp0141, Centre for Economic Performance, LSE.
    2. Rostowski, J., 1993. "Creating stable monetary systems in post-communist economies," LSE Research Online Documents on Economics 20970, London School of Economics and Political Science, LSE Library.
    3. Schmieding, Holger, 1992. "No need for a monetary halfway house: Lessons from the European Payments Union for post-Soviet currency arrangements," Kiel Discussion Papers 189, Kiel Institute for the World Economy (IfW Kiel).

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