Credibility and Adjustment: Gold Standards Versus Currency Boards

32 Pages Posted: 9 Jun 2004

Date Written: May 2004


It is often maintained that currency boards (CBs) and gold standards (GSs) are alike in that they are stringent monetary rules, the two basic features of which are high credibility of monetary authorities and the existence of automatic adjustment (non discretionary) mechanism. This article includes a comparative analysis of these two types of regimes both from the perspective of the sources and mechanisms of generating confidence and credibility, and the elements of operation of the automatic adjustment mechanism. Confidence under the GS is endogenously driven, whereas it is exogenously determined under the CB. CB is a much more asymmetric regime than GS (the adjustment is much to the detriment of peripheral countries) although asymmetry is a typical feature of any monetary regime. The lack of credibility is typical for peripheral countries and cannot be overcome completely even by "hard" monetary regimes.

Keywords: Monetary regime, gold standards, and currency boards

JEL Classification: E4, E42

Suggested Citation

Desquilbet, Jean-Baptiste A and Nenovsky, Nikolay, Credibility and Adjustment: Gold Standards Versus Currency Boards (May 2004). Available at SSRN: or

Jean-Baptiste A Desquilbet

Université Lille Nord de France ( email )

Lille, 59000

Nikolay Nenovsky (Contact Author)

Bulgarian National Bank ( email )

str "St. Sofia" 5
Sofia, 1040
+ 359 2 9145 1239 (Phone)
+ 359 2 980 24 25 (Fax)

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