ВАЛУТНИ ОДБОР КАО АЛТЕРНАТИВА ЦЕНТРАЛНОЈ БАНЦИ
CURRENCY BOARD AS AN ALTERNATIVE TO THE CENTRAL BANK

Summary/Abstract: In the last few years there has been a growing popularity of the institution of currency board as an institutional arrangement which completely eliminates the discretion of the monetary authorities. The currency board implies: a fixed exchange rate pertaining to the chosen reserve currency, a monetary base fully secured by monetary reserves, and unrestricted convertibility. For the countries with feeble political and monetary institutions, which have. confronted consequences of hyperinflation, whose enterprises have been accommodated to the environment characterised by high inflation, the establishment of the currency board (as an extreme variant of a fixed exchange rate) could be the only way to repress inflation, to stabilize economy and to restore credibility of monetary authorities. However, beside these positive features, the currency board has serious drawbacks. In conditions of unfavourable long-run trends (high fiscal and quasi-fiscal deficit, current account deficit, high foreign debt, etc.), the rigidity of this mechanism curtails space for timely adjustments in economic policy.

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