Was Argentinas monetary system an orthodox currency board?
Argentina’s monetary system from April 1, 1991 to January 6, 2002 was known locally as convertibility. It was an unusual name for an unusual system. The convertibility system was not an orthodox currency board. Rather, it was a currency board-like system: a mixture of currency board and central banking features. In writings dating back to 1991, I proposed that Argentina establish an orthodox currency board and criticized convertibility as an unstable, mixed system. The three defining features of an orthodox currency board are: • a fixed exchange rate with its anchor currency, • unrestricted convertibility into and out of the anchor currency at the fixed rate, and • net reserves of 100 percent or slightly more of the board’s monetary liabilities, held in foreign assets only. Together, these three features imply that an orthodox currency board is a narrowly focused, rule-bound institution. In particular, an orthodox currency board lacks the power to conduct sterilized intervention, does
