From gold standard to currency board arrangements: A case of déjà vu?

G. M. (BUKS) WESSELS, UNIVERSITY OF THE FREE STATE, SOUTH AFRICA
Abstract: In their quest for an appropriate exchange rate regime amidst dynamic international monetary environment countries sometimes transform a previously discarded exchange rate system into a new guise. Such is the case regarding the historic gold standard and the current increased occurrence of currency board arrangements. Despite striking similarities between them i.r.o. their operational mechanics, core structural ingredients and their focus on common policy objectives, the contradiction arises that the gold standard is regarded as a defunct non-starter whereas currency boards are in vogue as a solution for especially emerging countries’ economic policy woes. By analysing and comparing the two systems, this paper addresses the contradiction, concluding that, regardless of far ranging similarities, currency board arrangements as a fixed exchange rate system are more likely to be utilized as an exchange rate regime than a gold standard.
Keywords: Exchange rate regimes, Fixed exchange rates, Currency boards, Gold standard