Abstract
Currency Board Arrangements (CBAs) have been introduced in Estonia, Lithuania, Bulgaria and Bosnia and Herzegovina in a view to underpinning the monetary credibility of the process of transition and/or of macroeconomic stabilization. To offset the financial and adjustment constraints imposed by the CBAs rigidity, the banking system has developed original strategies and CBAs have been adjusted. But such palliative measures provide only limited room for manoeuvre and tend to distort the CBA, thereby damaging its credibility. Indeed, the CBA is a perverse system in the sense that its workings is in contradiction with the endogeneity of money. The prospect of eventual integration in the EMU is a possible exit solution but its success will largely depend on European financing flows.
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