The Role of the Currency Board in Bulgaria's Stabilization

April 1, 1999

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Format: Chicago

Anne Marie Gulde. The Role of the Currency Board in Bulgaria's Stabilization, (USA: International Monetary Fund, 1999) accessed November 21, 2024

Disclaimer: This Policy Dicussion Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper focuses on the process leading to the choice of a currency board as a stabilization instrument, and its specific design. The use of a currency board was complicated and controversial because of serious structural problems, including a systemic banking crisis. It argues that the arrangement was well designed for the task at hand, combining a traditional rule-based exchange arrangement with a number of legal and structural measures to address the pressing bank sector and fiscal issues. In light of the interdependence of the measures, the success of Bulgaria’s currency board stabilization must be attributed to a combination of elements, of which the currency board was a crucial, but not the only determining factor. Structural problems, most notably in the banking sector, were equally severe. The banking crisis had been smoldering since at least 1995. A 1996 review found that out often state banks, which still accounted for more than 80 percent of banking sector assets, nine had negative capital and more than half of all state banks' portfolios were nonperforming.

Subject: Banking, Central banks, Commercial banks, Currencies, Currency boards, Exchange rates, Financial institutions, Foreign exchange, International reserves, Money

Keywords: Banking crisis, BNB law, BNB structure, Central bank, Commercial banks, Currencies, Currency, Currency bill, Currency board, Currency board mechanism, Currency board plan, Currency board rules, Currency board system, Currency boards, Deutsche mark, Exchange rates, Foreign exchange, International reserves, PDP, Peg currency, Stabilization policy, U.S. dollar

Publication Details

Pages:

22
Volume:

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DOI:

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Issue:

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Series:

Policy Discussion Paper No. 1999/003
Stock No:

PPIEA0031999
ISBN:

9781451974102
ISSN:

1564-5193

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