Currency Board

choi

Steve H Hanke, Erdogan Can Save the Turkish Lira; He should form a currency board -- a monetary-reform measure that's been tried 70 times and never failed. Wall Street Journal, Aug 13, 2018 (op-ed).
https://www.wsj.com/articles/erd ... ish-lira-1534110387

Quote:

"The Turkish lira floats * * * Since Recep Tayyip Erdogan became president in August 2014 [1954- ; was prime minister 2003-2014], the lira has shed 66% of its value against the US dollar. Since May 14, when Mr Erdogan announced he was taking Turkey's monetary reins into his own hands, the lira has plunged 31%. * * * Inflation has ravaged Turkey for decades. The average annual inflation rates for the 1970s, 1980s, 1990s and 2000s were 22.4%, 49.6%, 76.7%, and 22.3%, respectively.

"there is a way to save the lira from its death spiral and crush inflation immediately. Turkey should adopt a currency board. A currency board issues notes and coins convertible on demand into a foreign anchor currency at a fixed rate of exchange. It is required to hold anchor-currency reserves equal to 100% of its monetary liabilities

"A currency board requires no preconditions and can be installed rapidly. Government finances, state-owned enterprises and trade need not be reformed before a currency board can issue money.  Currency boards have existed in some 70 countries. The first was installed in the British Indian Ocean colony of Mauritius in 1849. No currency board has failed.

"To make the Turkish lira as good as gold—or some other anchor currency of choice, meaning the euro or US dollar—Mr Erdogan should announce today that Turkey will install a currency board

"Mr Hanke is a professor of applied economics at the Johns Hopkins University.

My comment:
(a) The article is available to the public.
(b) Guy Johnson and James Hertling, Erdogan Plans to Tighten His Grip on Turkey's Economy. Bloomberg, May 14, 2018
https://www.bloomberg.com/news/a ... on-turkey-s-economy
("Erdogan said he intends to tighten his grip on the economy and take more responsibility for monetary policy if he wins an election next month. * * * told Bloomberg TV in London on Monday [May 14]  that after the vote transforms Turkey into a full presidential system, he expects the central bank will have to heed his calls * * * The lira slid to its weakest level ever against the dollar after his remarks were published, losing as much as 0.9 percent")

(c) "In 1998 President Suharto appointed me his special counselor and announced that he was considering a currency board for Indonesia."
(i) President Suharto talked to US and did not implement currency board. He resigned that year, after popular uprising.
(ii) Mark M Spiegel, A Currency Board for Indonesia?  Federal Reserve Bank of San Francisco, Mar 20, 1998
https://www.frbsf.org/economic-r ... oard-for-indonesia/
("I argue that the characteristics of Indonesia — including its size [so far economies with currency board has been small; maybe Hong Kong is the biggest], its trading pattern, and its history of fiscal responsibility — as well as the current problems [1997 East Asian financial crisis, starting with collapse of Thai currency when Thailand did not have emough foreign reserve to defend its currency] faced by Indonesian financial markets and the nation’s reserve position [also lacking], shed doubt on its potential for a successful dollar-backed currency board. & & & [section heading:] Is a currency board desirable for Indonesia?")
(iii) "A gold standard is a special case of a currency board where the value of the national currency is linked to the value of gold instead of a foreign currency./ en.wikipedia.org for "currency board."

(d)
(i) There is a Wiki page for the author. Go there only to learn how to pronounce his last name.
(ii) Steve H. Hanke and Kurt Schuler, Currency Boards for Developing Countries (Revised Edition 2015).
http://sites.krieger.jhu.edu/iae ... ing_Countries-1.pdf
(A) Google indicates that this has been cited 238 times.
(B) Read only page 8 under the bold-face section heading "Currency boards versus dollarization, multinational central banks, and free banking."