Lithuania: History and Future of the Currency Board Arrangement

35 Pages Posted: 2 Feb 2006

See all articles by Patricia Alonso-Gamo

Patricia Alonso-Gamo

International Monetary Fund (IMF)

S. Fabrizio

International Monetary Fund (IMF)

V. Kramarenko

International Monetary Fund (IMF)

Qing Wang

International Monetary Fund (IMF)

Date Written: August 2002

Abstract

The paper examines the evolution of the institutional setup of Lithuania`s Currency Board Arrangement (CBA) and competitiveness from 1994 through 2001, with a view to determining the resilience of the Lithuanian CBA to external shocks in 2002-03. First, several indicators of competitiveness are analyzed in the context of productivity gains and flexibility of the labor market and prices are considered. Then, the equilibrium exchange rate and misalignments of the actual rate from it are estimated in a cointegration framework. The paper concludes that, under current policies, the CBA would be able to cope with sizable external shocks during 2002-03 provided supporting policies remain in place.

Keywords: Real effective exchange rate, competitiveness, currency board arrangement

JEL Classification: E42, E52, E61, F33

Suggested Citation

Alonso-Gamo, Patricia and Fabrizio, Stefania and Kramarenko, V. and Wang, Qing, Lithuania: History and Future of the Currency Board Arrangement (August 2002). IMF Working Paper, Vol. , pp. 1-35, 2002. Available at SSRN: https://ssrn.com/abstract=879893

Patricia Alonso-Gamo (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Stefania Fabrizio

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

V. Kramarenko

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Qing Wang

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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