Russian Currency and Finance A Currency Board Approach to Reform

"Russian Currency and Finance" presents a radical alternative for curing Russia's soaring inflation and unstable currency. The authors argue that stabilization in Russia is unlikely to occur as long as its currency remains under the control of the Central Bank of Russia. This means that conventional approaches to reform have very little chance of success.
The authors propose that Russia adopt a currency board system such as exists in Hong Kong today. Under this system, the ruble would be linked to a stable foreign currency at a fixed exchange rate, providing a stable, fully convertible domestic currency for Russia. The currency board system has been well-tested and has been used successfully before in Russia. The book explains in detail how the Russian government could establish and operate a currency board.

As the new Russian state struggles with the transition to a market economy, the need for radical monetary reform becomes increasingly urgent. The choice of reform is crucial, for it will largely determine Russia's future economic performance. In order to break free of the lingering effects of Soviet central planning, the new Russian state needs a stable, convertible currency. Steve H. Hanke, Lars Jonung and Kurt Schuler propose that Russia establishes a currency board which would issue a Russian currency fully convertible with international currency, backed 100 per cent by international bonds. The international community would aid in establishing the currency board by providing the initial reserves. Early supplies of this new Russian currency would be distributed free to Russian citizens. The authors give detailed explanations of how the currency board could be established and how it would work.

1. The Case for a Currency Board in Russia; 2. The Case against the Central Bank of Russia; 3. Central Banking and the Russian Monetary System; 4. Currency Boards, Central Banks, and the Money Supply Process; 5. How to Establish a Currency Board in Russia; 6. How to Operate and Protect a Currency Board in Russia; 7. The Currency Board and Reform of the Russian Monetary System; 8. Objections to a Currency Board in Russia; 9. Two Successful Russian Monetary Reforms; ch0010 Conclusion;

Hanke, Steve H.; Jonung, Lars; Schuler, Kurt