Why Bulgaria needs to deepen its currency board
Bulgaria’s currency board rules should be extended to transaction deposits at commercial banks
Since mid-1997, the Bulgarian National Bank (BNB) has operated with currency board rules under which it passively issues and redeems the lev at a fixed exchange rate for the euro. Under these rules, Bulgaria’s currency has remained stable, reflecting eurozone-wide inflation rates, and its economy has grown vigorously.
Bulgaria’s banking sector, however, has remained fragile.
To address this, Bulgaria should protect its money supply by extending the BNB’s currency board rules from its currency
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