Historically, countries with currency board arrangements (CB As) have experienced lower inflation and higher growth than those with other regimes. The experiences of three candidates for EU membership with CB As (Estonia, Lithuania, and Bulgaria) have also been generally favorable. Can CBAs serve these transition countries well all the way up to the adoption of the euro? After considering the pros and cons, this paper provides an affirmative answer, but notes that to preserve the viability of their CBAs throughout the process, these countries need to maintain strict policy discipline and be prepared to deal with large capital inflows and asymmetric shocks.
Chart 2-1 shows Japan's national saving rate, both gross and net of depreciation, for the period 1975-93. Both of these measures indicate a negative trend through the first part of the 1980s, with levels in the early 1980s that are about 2 percentage points of GNP lower than those recorded at the beginning of the period. Since 1983, however, there has been a moderate increase in saving rates.Gross saving in Japan declined from about 33 percent of GNP in 1975 to 30 percent in 1983, before recovering beginning in the mid-1980s. Preliminary data for 1993 suggest that gross saving rebounded to 33 percent of Chart 2-1. Gross and Net Sources: Japan, Economic Planning Agency (EPA), Annual Report | on National Accounts (Tokyo, various issues); and IMF staff estimates.
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