Which Currency Is Best for Business in a Small Country?
Discussion Paper of the Institute for Organisational Economics 5/2015
20 Pages Posted: 4 Mar 2016 Last revised: 8 Apr 2017
Date Written: May 1, 2015
The optimal currency for a country is an important topic. While it is difficult to identify the best option overall, for all stakeholders and including political considerations, it is easier to answer the more limited question of the title: Which currency is best for business in a small country? Several kinds of currencies are discussed and three criteria that business companies are interested in are applied. Although there are opposing considerations, the best compromise for business in a small country seems to be a currency board with a fixed exchange rate that can be adapted in case of a crisis. A currency board is also the best protection against speculative attacks. The anchor currency should be that of the largest trading partner, especially if the trade with it is much larger than with all other ones.
Keywords: Currency, Currency Board, Currency Union, Exchange Rate
JEL Classification: E42, F31, F45, G01, M21
Suggested Citation: Suggested Citation