STABILITY OF THE CURRENCY BOARD SYSTEM OF BOSNIA AND HERZEGOVINA

Abstract

This paper deals with the topic of definition, structure, goal and stability of the currency board system in Bosnia and Herzegovina with the main focus on the eventual stability of the system itself. The currency board system is an alternative to traditional central banking, in which the monetary authority or central bank issues a domestic currency that is fully backed by foreign asset reserves and is willing to exchange its currency for an anchor foreign currency at a fixed rate. With regard to Bosnia and Herzegovina, from an economic, political and institutional perspective, there are strong pros and cons to using the currency board system. One of these reasons is macroeconomic stability, which is the main focus of the paper.