Currency Board is a monetary institution that issues domestic
currency
- Currency Board generates profits from interest earned and
expense in maintaining liabilities.
- The function of currency Board is to exchange notes and coins
at the fixed rate.
- It does not lend to domestic banks or government.
- Currency Board does not act as a lender of last resort to
protect domestic banks from losses.
Currency Board is not successful with out the fundamentals of
adequate reserves,in addition to the rule of law.
- Dollarization occurs when residents of a country use a foreign
currency.
- It occurs when government adopts foreign currency as a legal
tender.
- It is part of a currency zone with the country whose currency
it uses.
- Supply of money is determined by the balance of payment.
- Lower transaction costs.
- Lower inflation and lower risk of future inflation.
Greater Economic openness. and transparency.