Development of the banking system under the Estonian currency board |
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Authors: | Mart Sõrg Vello Vensel |
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Institution: | (1) University of Tartu, Estonia;(2) Tallinn Technical University, Estonia |
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Abstract: | The choice of a suitable exchange rate regime is the subject of numerous discussions in economic literature. Estonia has been
successful in achieving economic stabilization and growth and steadily declining inflation. It has one of the highest per
capita foreign direct investments in central and eastern Europe. Estonia also has one of the most liberalized economies among
all transition countries. An essential element of the success of Estonian economic development is strict exchange rate control.
Estonia has adopted a currency board that serves as a signal of commitment to prudent monetary policy and as a guarantee of
sound money during the transition period. This paper discusses the experience of operating the currency board, some future
prospects of the currency board arrangement, and the development of the banking system in Estonia. |
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