Q. Based on the case study, answer the following question: Can currency boards make low-inflation policies credible?
Answer: Currency boards have the power to bring in anti-inflation credibility from the country to which the domestic currency is hook. Currency boards usually mayn't acquire government debt however it can discourage fiscal deficits leading to reduce a major cause of inflation and devaluation. In command for a currency board to be successful is by increasing the banking sector and that is able to get the government under pressure to abandon the currency board. Additionally if the markets anticipate that the government is leaving the currency board the country mayn't benefit from the potential of a currency board.