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A proposal on how to introduce a currency board based monetary system in the republic of Latvia

By 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

Topics: HG Finance
Publisher: Centre for Economic Performance, London School of Economics and Political Science
Year: 1992
OAI identifier: oai:eprints.lse.ac.uk:21046
Provided by: LSE Research Online
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