Specifics in Introduction and Functioning of the Currency Board in Bulgaria

Abstract

The article studies two main aspects of functioning of the currency board in Bulgaria: its characteristics and its specifics and peculiarities.&#x0D; Concerning the characteristics of the currency board in Bulgaria, the attention is focused on several theoretical matters of the nature of the currency board: mechanism for introduction of the currency board; choosing the foreign currency, to which the local monetary unit is to be fixed; financing the initial currency reserve, in order for the currency board to start functioning; setting the fixed exchange rate to the reserve currency; establishing the amount of coverage of the quantity of cash in circulation by the currency reserves; administration of the currency board; implementation of the function “lender of last resort” in cases of liquidity crisis; supervision of the commercial banks’ operation.&#x0D; Each country is characterized by its specifics in terms of management of public finances, condition of the real (non-financial) sector, service sector, monetary and banking system. These specifics are reflected in the monetary boards, introduced in the individual countries.&#x0D; The article provides a detailed analysis of the specifics of the currency board in Bulgaria.&#x0D; The options for an independent monetary policy of the central bank are heavily restricted, and on the other hand, the currency board attained the goal of its policy – ensuring of price stability. As of the present moment, Bulgaria joined the exchange rate mechanism (ERM II) in 2020 and makes every effort to cover the criteria for real convergence.</jats:p