Table 1
Performance of Currency BoardLike Systems of Estonia, Lithuania, and Bulgaria
Year
-1
0
+1
+2
+3
-4
+5
+6
+7
Inflation (%)
Estonia
211
1069*
89.8
47.6
28.8
23.1
11.2
11.0e
8.2e
Lithuania
410
72.1
39.7
24.6
8.9
8.1e
8.0e
--
--
Bulgaria
123
1095
30.0e
10.0e
--
--
--
--
--
Real GDP
growth (%)
Estonia
-11.8
-19.3
-8.5
-2.7
2.9
3.7
11.4
5.1e
3.6e
Lithuania
-30.4
1.0
3.0
3.6
5.7
5.3e
4.0e
--
--
Bulgaria
-10.9
-5.7e
5.0e
3.7e
--
--
--
--
--
Budget
balance (% of
GDP)
Estonia
0.4
1.2
-2.1
1.4
-0.4
-1.5
-0.5e
1.5e
--
Lithuania
1.8
-1.5
-1.8
-2.3
-1.9e
-1.4e
--
--
--
Bulgaria
-13.4
-3.5e
-2.0e
--
--
--
--
--
--
Interest
rate(%)
Estonia
--
--
--
5.7
4.9
3.5
6.5
10.0e
--
Lithuania
--
69.5
26.7
20.3
9.6
6.0e
--
--
--
Bulgaria
120
66.4
2.5e
--
--
--
--
--
--
Sources: International Monetary Fund, International Financial Statistics; Economist Intelligence Unit country
reports; and press reports.
Notes: Year 0 is the year the currency boardlike system was introduced: 1992 for Estonia, 1994 for Lithuania,
1997 for Bulgaria. Exchange rates: 8 Estonian kroons = 1 German mark, 4 Lithuanian litas = US$1, and 1000
Bulgarian leva = 1 German mark. The exchange rate in terms of the anchor currency has remained stable since
Year 0 in all cases.
Inflation is change in consumer price index, GDP = gross domestic product, interest rate is average interbank
rate, e = estimated, * = liberalization of prices from centrally planned levels occurred in this year.
most other former socialist countries.
Inflation has come down and stayed down.
Neighboring countries that like Russia have
Their economies began to grow within two
practiced extensive financial protectionism,
years after monetary reform occurred.
such as Belarus, Ukraine, and Romania, have
Because their currency boardlike systems
suffered the same financial problems as
cannot finance government budget deficits,
Russia.16
they have kept deficits low and have financed
them without resort to inflation. Estonia,
The only significant financial problem
Lithuania, and Bulgaria have not only per-
Estonia, Lithuania, and Bulgaria have
formed much better economically than
encountered is bank failures. However,
Russia has, they have performed better than
almost all other former socialist countries
13