An investigation into the credibility of currency board arrangements in Bosnia and Herzegovina and Bulgaria |
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| Institution: | 1. School of Economics and Business, University of Sarajevo, Trg oslobo?enja, Sarajevo, Bosnia and Herzegovina;2. Staffordshire University Business School, Leek road, Stoke-on-Trent, UK;3. Staffordshire University Business School, Leek road, Stoke-on-Trent, UK;1. Department of Endocrinology and Metabolism, Instituto Nacional de Ciencias Médicas y Nutrición, México City, México;2. Unit of Molecular Biology and Genomic Medicine, Instituto de Investigaciones Biomédicas, Universidad Nacional Autónoma de México and Instituto Nacional de Ciencias Médicas y Nutrición, México City, México;3. Department of Human Genetics, David Geffen School of Medicine at UCLA, Los Angeles, USA;4. Molecular Biology Institute at UCLA, Los Angeles, USA;1. Warsaw School of Economics and Institute for Structural Research, Poland\n;2. Centre for Economic Performance, London School of Economics and Political Science, United Kingdom\n;3. Dipartimento di Economia e Finanza, Università Cattolica di Milano, Italy and Centre for Research in Economic Analysis, Université du Luxembourg, Luxembourg |
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| Abstract: | Currency Boards are usually argued to increase the credibility of the monetary authority, although this effect ultimately depends on the economic, political and institutional circumstances in the specific country. Few studies have previously been able to address this issue empirically. Using a novel database, the analysis conducted in this paper finds that, other things being equal, the credibility of the monetary authority is likely to be higher in those European transition countries with currency board arrangements, namely Bosnia and Herzegovina and Bulgaria. The results also suggest that currency board arrangements are more likely to increase the credibility of the monetary authority in countries with a low level of trust in government and a weak economy. These findings imply that the maintenance of currency board arrangements in recent years in Bosnia and Herzegovina and Bulgaria may have been advantageous. |
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