Independent Currency Authorities: An Analytic Primer

This paper provides an analytic overview of independent currency authorities (ICAs), sometimes called currency boards. ICAs issue and redeem domestic currency on demand against an exchange standard and back such operations through a 100 percent marginal foreign reserve cover. They also impose significant constraints on the banking system and the budget of the country that operates them. When supporting institutions have been put in place, ICAs appear to promote price stability, foreign trade, saving, and investment.