1
Currency Board Systems and Hong Kongs Evolving
ArrangementsProfessor Tsang Shu-kiDepartment
of EconomicsHong Kong Baptist Universitywww.skts
ang.com A presentation at the Central
Banking CourseHong Kong Monetary Authority29
September 2009
2
Outline of the talk (1)

• How can an exchange rate be fixed?
• History of currency boards
• Classical currency boards
• Classical currency boards and modern monetary
  economy
• Modern currency boards and the AEL Model

3
Outline of the talk (2)

• Hong Kongs currency board system before and
  after the seven technical measures of 9/1998
• Hong Kongs currency board system and the three
  refinements of 5/2005
• The prospects for currency boards
• References

4
I. How can an exchange rate be fixed?
(1)

• Basically there are two ways to do so, assuming
  that a fixed exchange rate regime is desirable
  (which in itself is a separate issue).
• Government controls and intervention
• Foreign exchange controls e.g. China and
  Malaysia.
• Foreign exchange market intervention by the
  central bank difficult for an economy with large
  capital flows, e.g. Bank of England in 1992.

5
I. How can an exchange rate be
fixed? (2)

• Market-driven methods
• The Gold Standard (?????) late 19th Century and
  early 20th Century
• Currency Boards (???) previously mainly in
  British colonies now in Hong Kong, Estonia,
  Lithuania, Bulgaria etc. (Argentina adopted the
  system in 1991 but abandoned it in early 2002.)

6
I. How can an exchange rate be fixed?
(3)

• Both II (a) and (b) depend on self-interested
  market force to fix the exchange rate, without
  the need for government controls or intervention.
  The key activity is arbitrage (??). If the prices
  for the same product in two sub-markets differ
  from each other, then any market participant can
  buy the product at a lower price in one
  sub-market, and sell the product in the other at
  a higher price. A profit will be obtained at no
  risk. As many market participants perform similar
  arbitrage, the two prices should equalise,
  provided that the transaction cost is negligible.
  

7
I. How can an exchange rate be
fixed? (4)

• e.g. If A and B are functional or geographical
  sub-markets of the same product and PA lt PB,
  then arbitrage of buying low in A and selling
  high in B can be performed to obtain profit at no
  risk
• Buy low in A Sell high in B

PA
PB
8
I. How can an exchange rate be
fixed? (5)

• If the price, say PA, in one sub-market can be
  firmly locked, because of sufficient reserves of
  the party that fixes it, the price in the other
  sub-market, PB, will converge to PA, subject to
  the transaction cost (????). That was how the
  Gold Standard worked. That is how the currency
  board system is supposed to work, although A and
  PA refer to a different component and its price
  in the monetary base (????).

9
II. History of currency boards (1)

• The first currency board was set up in Mauritius
  in the 19th Century to be exact 1849. Dozens of
  economies---many former colonies of Britain, e.g.
  Falkland Islands, Malaya, Singapore,---adopted
  the system. It worked well in fixing their
  exchange rates.

10
II. History of currency boards (2)
11
III. Classical currency boards (1)

• The idea is surprisingly simple. A currency
  board issues currency notes (paper money), and
  trivially coins, with 100 per cent foreign
  reserves backing at a fixed exchange rate. This
  represents a strong commitment to economic
  discipline (????). Any holder of paper money
  therefore rests assured that he can exchange his
  notes into foreign currency at the fixed rate.

12
III. Classical currency boards (2)

• In a modern financial system, people hold much
  more than paper money. Bank deposits typically
  exceed currency notes by ten to twenty times. No
  currency boards can have reserves that fully
  match bank deposits. Hong Kong's foreign
  currency reserves (being the 8th largest in the
  world) are about 41 of the total amount of notes
  and coins and deposits in Hong Kong dollar.

13
III. Classical currency boards (3)

• How is the exchange rate of bank deposits fixed?
  Like the gold standard, it is through arbitrage.
  First, if there is speculation against the
  currency, funds will flow out of the economy and
  domestic interest rates will rise. This should
  attract back the funds and the exchange rate can
  be stabilised. Such a phenomenon is called
  specie flow, or interest rate arbitrage (????).

14
III. Classical currency boards (4)

• However, in a time of crisis, it is doubtful
  whether higher interest rates alone could fix the
  exchange rate. Hence a more important form of
  arbitrage, i.e. currency/exchange rate arbitrage
  (????), is necessary. Since the exchange rate of
  paper money is fixed, the exchange rate of bank
  deposits has to follow suit. Any rate
  differential gives rise to profitable activity of
  cash arbitrage (????), that closes the gap.

15
III. Classical currency boards (5)

• Take Hong Kongs system since 1983 as a
  theoretical example. Since HK notes are issued
  against certificates of indebtedness (CIs) backed
  by US at the rate of 7.80, if the market rate of
  deposit weakens to say 8.00 against the US
  dollar, anyone can theoretically withdraw cash
  from his HK dollar deposit account, surrender the
  paper money through the NIBs or other banks to
  the "currency board" (the Exchange Fund) and get
  US at the fixed but stronger rate of 7.80.

16
III. Classical currency boards (6)

• With HK 7.8 million in cash, he will be given
  US 1 million. By selling the US 1 million in
  the market, he fetches HK 8 million. So he
  obtains a profit of HK 200,000. That is
  arbitrage, risk-free (???), except that there may
  be transaction costs. Many others will want to do
  the same. The selling pressure on the US dollar
  will push the market rate back to 7.80, i.e.,
  equalising prices in the two sub-markets (the
  cash market and the deposit market).

17
III. Classical currency boards (7)

• In sum, there are three anchors for a classical
  currency board (1) economic discipline because
  of the 100 foreign reserves requirement for the
  issuance of currency (so theoretically paper
  money cannot be increased without a balance of
  payments surplus) (2) specie flow in the form of
  interest arbitrage and (3) exchange rate (cash)
  arbitrage that binds the spot exchange rate.
• As illustrated in Diagram 1, these three anchors
  reinforce one another.

18
Classical currency boards (8)

• Diagram 1 tripod for a classical CB to fix
  the exchange rate

Full reserves cover and economic discipline
Specie flow
Cash arbitrage
19
IV. Classical currency boards and modern monetary
economy (1)

• The inefficiency of cash arbitrage in a modern
  monetary economy is however a big problem. In HK,
  for example, there are only about 7 dollars of
  cash for every 100 dollars of bank deposit.
  Moreover, just 50 cents of the cash are in the
  hands of banks.
• If people engage actively in converting their
  deposits into cash to do arbitrage, it will be
  equivalent to a bank run.

20
IV. Classical currency boards and modern monetary
economy (2)

• Since the establishment of the linked exchange
  rate system, there has been very little, if at
  all, cash arbitrage activity.
• Between 1983 and 1998, the link was defended with
  a combination of market interventions including
  direct foreign exchange operations and
  manipulation of liquidity and interest rates.

21
V. Modern currency boards and the AEL Model (1)

• Argentina, Estonia and Lithuania adopted
  varieties of the currency board system in 1991,
  1992 and 1994 respectively. I have dubbed them
  as the AEL Model (?????). Though latecomers, all
  three AEL countries used an improved version of
  the system. It overcame the problem of cash
  movements for arbitrage, with which Hong Kong was
  struggling.

22
V. Modern currency boards and the AEL Model (2)

• They instituted a reserves system whereby each
  bank had an account with the central bank, in
  which any reserves for notes and deposits as well
  as the clearing balances were kept. The central
  bank guaranteed the full convertibility of all
  the claims of each bank, at the fixed exchange
  rate. In effect, the convertibility undertaking
  (????)covers the whole monetary base (??????),
  i.e. essentially all the domestic liabilities of
  the central bank, and not only cash. This set-up
  bypassed the problem of moving cash around for
  arbitrage.

23
V. Modern currency boards and the AEL Model (3)

• Under such a system, no banks will dare quote an
  exchange rate that deviates from the official
  rate, say 7.80. If Bank A quotes a rate of 8.00,
  Bank B can immediately sell US 1 million to it,
  fetching HK 8 million, with an instruction that
  Bank A transfers the amount to its account at the
  central bank, which will convert HK 8 million
  into US 1.026 million for Bank B at the fixed
  rate of 7.80. A profit of US26,000 then goes to
  Bank B. Other banks will also be jumping at the
  arbitrage opportunity if Bank A does not change
  its quote.

24
V. Modern currency boards and the AEL Model (4)

• Note that no cash movements are involved in all
  these electronic transactions (????), as the
  central bank plays the role of settling arbitrage
  activities between banks by providing the
  necessary foreign reserves. The market exchange
  could only deviate from the official rate for the
  small amount of transaction costs involved, if at
  all.
• With this improved currency board system,
  Argentina, Estonia and Lithuania were able to
  ensure 100 per cent stability in their spot
  exchange rates.

25
V. Modern currency boards and the AEL Model (5)

• In 1995, Argentina faced serious crises
• 20 per cent of bank deposits were lost in less
  than three months
• sixty banks folded up
• economic growth rate was a negative 4.6 and
• unemployment shot up to 16.
• Yet the spot market exchange rate adhered
  strictly to the official rate (of 1 peso against
  1 US).

26
V. Modern currency boards and the AEL Model (6)

• The same miracle occurred in Lithuania. A
  banking crisis broke out in December 1995
• The nation's two largest banks were closed.
• Deposits fell by 15 in the first quarter of
  1996.
• Yet the official rate of 4 litas against 1 US
  dollar was not challenged at all.

27
VI. Hong Kongs currency board before and after
the 7 technical measures (1)

• Between 1984 and April 1998, the Hong Kong
  currency board system did not behave according to
  the theory of the classical currency board. The
  key problem was that there was no effective
  currency arbitrage mechanism. Cash-based
  arbitrage was a non-starter, because it
  represented a very small, and increasingly small,
  of total money supply. There was simply very
  little cash to use for arbitrage.

28
VI. Hong Kongs currency board before and after
the 7 technical measures (2)

• Other than the CIs, there were no explicit
  reserves backing or convertibility undertaking.
  As a result, currency arbitrage outside cash
  could not be carried out. The monetary authority
  had to depend on the manipulation of interbank
  liquidity and interest rates, as well as outright
  intervention in the foreign exchange market to
  defend the Hong Kong dollar. Some would call that
  central banking in disguise.

29
VI. Hong Kongs currency board before and after
the 7 technical measures (3)

• In the meantime, HK embarked on a process of
  strengthening monetary control. In 1988, the
  Accounting Arrangements were imposed, giving the
  monetary authority an indirect handle on banking
  liquidity. In the 1990s, the issuance of EFBNs
  (Exchange Fund bills and notes), the setting up
  of the LAF (liquidity adjustment facility), and
  the eventual establishment of the HKMA (Hong Kong
  Monetary Authority) were key milestones.

30
VI. Hong Kongs currency board before and after
the 7 technical measures (4)

• The HKMA made it known that it would defend the
  Hong Kong dollar by having flexible ways to
  manipulate the monetary base and to influence
  interest rates.
• Mr. Andrew Sheng, then Deputy Chief Executive of
  the HKMA, said on the heel of the Mexican crisis,
  .... in recent years the HKMA has introduced
  various reforms to its monetary management tools,
  or more aptly, our monetary armoury, to maintain
  exchange rate stability.

31
VI. Hong Kongs currency board before and after
the 7 technical measures (5)

• ... As was seen in January (1995), our
  determination to use the interest rate tool was
  sufficient to deter further speculation against
  the HK dollar. In fact, currently, the HK dollar
  is at a stronger level than it was at 1994 year
  end. (Sheng, 1995, p.60) To the extent that the
  HKMA intervenes through the use of foreign
  exchange swaps, any increase in the monetary base
  is fully backed by foreign exchange. We use a
  whole range of instruments in influencing the
  level of interbank liquidity to manage interbank
  interest rates, and consequently, maintain
  exchange rate stability. (p.61)

32
VI. Hong Kongs currency board before and after
the 7 technical measures (6)

• In October 1997, the Hong Kong dollar suffered a
  strong speculative attack. Doubts were cast on
  the nature and the robustness of Hong Kongs
  currency board. A controversy arose concerning
  whether and to what extent the HKMA did intervene
  in the markets on 23 October 1997, and was
  therefore responsible for the unprecedented high
  interest rates---with overnight interbank rates
  going up to 280 at one point.

33
VI. Hong Kongs currency board before and after
the 7 technical measures (7)

• In April 1998, the HKMA announced a commitment
  not to actively manage the clearing balance of
  the banking system to defend the exchange rate
  (FSB, 1998, paras. 3.36-3.41 Annex 3.5), the
  HKMA would keep to the rule of automatic
  adjustment.
• However, the HKMA reserved the option of
  discretionary intervention to defend the exchange
  rate near the 7.80 level.

34
VI. Hong Kongs currency board before and after
the 7 technical measures (8)

• Diagram 2 The tripod for HKs CB after April
  1998

Full reserves cover and economic discipline
Discretionary intervention near 7.80
Specie flow
35
VI. Hong Kongs currency board before and after
the 7 technical measures (9)

• The intervention in the stock and futures markets
  by the Hong Kong government in August 1998
  touched off a huge controversy. On 5 September
  1998, the HKMA announced seven technical measures
  (??????) to strengthen the link. These measures
  can actually be grouped into two categories (1)
  the convertibility undertaking (CU) that banks
  could exchange their Hong Kong dollar balances
  with the HKMA into US dollars at the fixed
  exchange rate of 7.75 and (2) the replacement of
  the Liquidity Adjustment Facility (LAF) by a
  formal Discount Window (with no penalties against
  frequent users).

36
VI. Hong Kongs currency board before and after
the 7 technical measures (10)

• The first move means that the coverage of
  convertibility was effectively extended from bank
  notes to the whole monetary base. The Discount
  Window, on the other hand, enlarged the monetary
  base. As said above, a system of convertible
  reserves is the core mechanism in the AEL
  (Argentina, Estonia and Lithuania) Model of
  modernised currency board arrangements. The new
  tripod of CB that the HKMA instituted in
  September 1998 can be depicted as in Diagram 3.

37
VI. Hong Kongs currency board before and after
the 7 technical measures (11)

• It was a partial adoption of the AEL model. The
  CU was one-way (??????) (on the weak side) only,
  but currency arbitrage ensured that the 7.80
  fixed rate could not be breached. Further tidying
  up of the system since then included the 500-day
  shift of the CU rate from 7.75 to 7.80, the
  increase in the transparency of currency board
  operations and the changes in the transferability
  and convertibility among the components of the
  monetary base etc.

38
VI. Hong Kongs currency board before and after
the 7 technical measures (12)

• Diagram 3 The tripod for HKs CB after
  September 1998

Full reserves cover and economic discipline
Oneway Convertibility Undertaking at 7.80
Specie flow
39
VII. Hong Kongs currency board and the three
refinements (1)

• Since late 2003, speculative pressure on a
  revaluation of the Chinese renminbi rose and
  there were large inflows into Hong Kong, leading
  to near zero short term interest rates, large
  aggregate balances and strong spot rates for the
  HK dollar (at one point to about 7.70).

40
VII. Hong Kongs currency board and the three
refinements (2)

• The very low interest rates failed to generate
  sufficient and effective interest arbitrage to
  offset the revaluation pressure, i.e. to weaken
  the exchange rate to the 7.80 level supposedly as
  a result of outflow of funds.
• This was the reverse of the difficulty
  experienced before the seven technical measures
  of September 1998. Then very high interest rates
  were not powerful enough in strengthening the HK
  dollar against devaluation pressure supposedly
  through attracting inflow of funds.
• Hence a two-way CU (??????) seemed necessary.

41
VII. Hong Kongs currency board and the three
refinements (3)

• On May 18, 2005, the HKMA introduced the three
  refinements (??????)
• a strong-side Convertibility Undertaking by the
  HKMA to buy US dollars from licensed banks at
  7.75
• the shifting over 5 weeks of the existing
  weak-side Convertibility Undertaking by the HKMA
  to sell US dollars to licensed banks from 7.80 to
  7.85, so as to achieve symmetry around the Linked
  Rate of 7.80

42
VII. Hong Kongs currency board and the three
refinements (4)

• within the zone defined by the levels of the
  Convertibility Undertakings (the "Convertibility
  Zone"), the HKMA may choose to conduct market
  operations consistent with Currency Board
  principles. These market operations shall be
  aimed at promoting the smooth functioning of the
  Linked Exchange Rate System, for example, by
  removing any market anomalies that may arise from
  time to time.
• With these three refinements, the latest currency
  board system can be depicted as follows

43
VII. Hong Kongs currency board and the three
refinements (5)

• Diagram 4 The tripod for HKs CB after May
  2005

Full reserves cover and economic discipline
Twoway Convertibility Undertaking at 7.75 and
7.85
Specie flow
44
VII. Hong Kongs currency board and the three
refinements (6)

• The wide corridor of 7.75-7.85 The
  convertibility zone (????) is regarded as very
  wide by some commentators but vulnerable to
  speculation by others. In my article Liquidity
  management, two-way CU ., I discussed the
  possibility of a powerful speculator pushing the
  exchange rate up and down the corridor of 50
  pips (http//www.sktsang.com/ArchiveI/Tsang021201
  .pdf)

45
VII. Hong Kongs currency board and the three
refinements (7)

• From this perspective, a two-way CU with no
  spread would kill its fun. The problems that
  this generates are familiar. The foreign exchange
  market in HKD/USD will be displaced, leading to
  layoffs. (Some could argue that it is a matter of
  sacrificing private interests for the sake of the
  public good.) Moreover, imagine a CU with no
  spread and a near-zero AB in an international
  financial centre. I cant honestly recommend it
  as a solution and I didnt, especially given
  Hong Kongs post-1998 developments.

46
VII. Hong Kongs currency board and the three
refinements (8)

• What is the alternative? Interestingly, we have
  to travel some distance to find it. A
  convertibility zone of hundreds of pips would
  mean that any speculating party, in spite of its
  market power, faces a relatively spacious
  corridor and the risk and cost of his actions
  are increased.
• See Tsang Shu-ki, The convertibility zone and
  operations to remove market anomalies
  (www.sktsang.com/ArchiveI/Convertibility zone and
  anomalies.pdf)

47
VII. Hong Kongs currency board and the three
refinements (9)

• I remember long time ago I used to play
  one-a-side (plastic) football games with my
  younger brother in the narrow corridor of our old
  home. The goals were simply conceived to exist
  at either end of the corridor, but long-range
  shooting was forbidden. Being physically
  stronger, I always resorted to the ploy of
  kicking the ball to one side and then speeding
  past him on the other to collect the ball back
  after its rebound from the wall. The rest was
  peanut.

48
VII. Hong Kongs currency board and the three
refinements (10)

• What if the corridor had been quite wide? The
  rebound from the wall, from whether the left or
  the right, would have taken longer to reach me.
  So my little brother would have had time to turn
  around and chase the ball almost on a par with
  me. I would not have had the easy job of rushing
  it towards an open goal.
• A convertibility zone is a trade-off between
  stability as well as credibility on the one hand,
  and liquidity and flexibility on the other.
• This is a reality for the CBA in Hong Kong, which
  is an international financial centre with huge
  daily capital flows. Too rigid a system would
  mean that any pressure cannot be shared by
  several buffer variables.

49
VII. Hong Kongs currency board and the three
refinements (11)

• However, a consequence of this flexibility is
  the phenomenon of multiple equilibria among the
  spot exchange rate, the interest rate and the
  aggregate balance. And there is no
  mean-reverting tendency towards 7.80 as our
  linked exchange rate.
• In a period of global financial disturbances from
  outside, these non-reverting phenomena involving
  different variables are going to become more
  pronounced. In any case, the currency board
  system in HK would probably remain intact. Any
  cost, if at all, would be borne by other economic
  variables.

50

51
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52
VII. Hong Kongs currency board and the three
refinements (12)

• In the aftermath of the latest financial tsunami,
  the aggregate balance has risen to historically
  unprecedented levels, with interest rates falling
  to near zero. Yet the exchange rate has been
  consistently strong, close to the CU of 7.75.
  Actually the CU has been triggered on quite a
  number of occasions.
• This is a testimony to the robustness of the
  currency board system in Hong Kong.
• One risk is of course that there might be a
  drastic swing to the weak-side CU of 7.85, if
  internal and/or external shocks arise.

53
VIII. The prospects for currency boards (1)

• The currency board system is supposed to be the
  most disciplined and transparent fixed exchange
  rate regime in the world.
• Through arbitrage in a situation of sufficient
  reserves covering the monetary base and sound
  banking, the efficiency risk of the spot exchange
  rate is largely eliminated.
• However, the systemic risk still remains.

54
VIII. The prospects for currency boards
(2)

• Systemic risk refers to the risk of the system
  being abandoned not because the spot exchange
  rate cannot be fixed, but as a result of the
  economic pains associated with a misaligned
  exchange rate or very weak economic fundamentals
  (e.g. Argentina), and of any decision based on
  politics. Risk premium will be reflected in
  interest rates and forward exchange rates.
  Argentina was forced to abandon the system in
  early 2002.

55
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56
VIII. The prospects for currency
boards (3)

• The beginning of the end for the AEL Model?
  Estonia and Lithuania both became a member of
  the EU in 2004. Both then joined the Exchange
  Rate Mechanism II (ERM II) and officially stated
  their objective to adopt the euro soon after the
  mandatory minimum requirement of two years.
  Estonia has been maintaining the currency board
  arrangement with a fixed rate of one euro to
  15.6466 Estonian kroons, while Lithuanias
  currency has been pegged at the rate of 3.4528
  litas per euro.

57
VIII. The prospects for currency boards
(4)

• However, the process is nothing automatic. Both
  have been on the watch list by the European
  Central Bank on the basis of convergence criteria
  and conditions for final accession to the euro
  area, i.e. the replacement of their own national
  currencies by the euro. Estonia's effort has been
  hindered by failing to meet the inflation target
  (a nominal convergence criterion) set by the EU
  (Eesti Pank, Estonia's National Changeover
  Plan, July 2009, www.eestipank.info/pub/en/EL/ELi
  it/euro/eplaan_1.pdf
• Lithuania has been bothered by a similar problem,
  and according to the current data, the most
  favourable period for Lithuania to join the euro
  area will begin from 2010. (Lietuvos Bankas,
  Adoption of the Euro in Lithuania,
  www.lb.lt/eng/euro/index.htm.

58
VIII. The prospects for currency boards
(5)

• The debate between a fixed exchange rate system
  and a floating rate regime is a long standing
  one, and unlikely to be solved any time soon.
• In between, there can of course be basket peg,
  crawling peg, target zone, managed float,
  and their various combinations.
• The purists would argue for corner solutions
  either hard peg or clean float, as the
  various combinations suffer from a lack of
  credibility.

59
VIII. The prospects for currency boards
(6)

• A small open economy with very flexible asset and
  factor markets will find it beneficial to adopt a
  fixed rate because the certainty will promote
  long term investment and facilitate structural
  changes.
• For developing and emerging markets, it will help
  to impose monetary discipline and promote the
  development of long-term capital market (and
  avoid the original sin).

60
VIII. The prospects for currency boards
(7)

• There may be a fear of floating for small open
  economies, because of the absence of a nominal
  anchor. Some have resorted to inflation
  targeting as an alternative.
• On the other hand, though, whether the fixed rate
  is an appropriate one, particularly in times of
  significant structural or international sea
  changes, is always a headache. A fixed rate can
  also become a sitting duck for speculators.

61
VIII. The prospects for currency boards
(8)

• The merit of floating is that it serves as a good
  barometer giving early warning signals about
  the economy. One could say that it actually
  imposes continuing discipline on the authorities
  as well as the private enterprises and they
  should adjust in time. The demerit is volatility
  and overshooting typical of financial markets.
• Well, the debate will no doubt go on.

62
VIII. The prospects for currency boards
(9)

• Although the AEL Model is disintegrating, the
  principles behind its operations are sound and
  can serve as lessons for aspiring fixed exchange
  rate regimes, provided that the rate is not
  misaligned in a fundamental sense and suitable
  economic policies are implemented to support its
  viability.
• There seems to be little choice for Hong Kong but
  to stick with the currency board system in the
  near term.

63
VIII. The prospects for currency boards
(10)

• In the future, the authorities may consider the
  possibility of re-pegging the Hong Kong dollar to
  the Renminbi or even a monetary union with the
  Mainland. However, many conditions (including the
  full convertibility of the Renminbi) need to be
  fulfilled first.

64
References (1)

• Blejer, Mario (2003), Argentina Managing the
  Financial Crisis, a presentation at the World
  Bank on 22 October 2003 (http//info.worldbank.org
  /etools/bspan/PresentationView.asp?PID940EID328
  ).
• Financial Services Bureau (FSB) (1998), Report on
  Financial Market Review, Hong Kong SAR
  Government, April.
• Gulde-Wolf, Anne-Marie and Keller, Peter (2002),
  Another Look at Currency Board Arrangements And
  Hard Exchange Rate Pegs for Advanced EU Accession
  Countries, in Urmas Sepp and Martti Randveer
  (eds.), Alternative Monetary Regimes in Entry to
  EMU, Eesti Pank, November.

65
References (2)

• Hanke, Steve H. and Schuler, Kurt (1994),
  Currency Boards for Developing Countries, San
  Francisco International Center for Economic
  Research.
• Ho, Corrine (2002), A survey of the
  institutional and operational aspects of
  modern-day currency boards, BIS Working Paper
  No. 110, March.
• Hong Kong Monetary Authority (HKMA) (1994), The
  Practice of Central Banking in Hong Kong.
• HKMA (1999), The currency board account and
  other fine-tuning measures to strengthen the
  currency board arrangements in Hong Kong,
  Quarterly Bulletin, May, pp.1-6.

66
References (3)

• Latter, Anthony (1993), The currency board
  approach to monetary policy--from Africa to
  Argentina and Estonia, via Hong Kong, Monetary
  Management in Hong Kong, Hong Kong Monetary
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