Monetary reform for a free Estonia. A Currency Board Solution

Like every new nation, Estonia must now choose a monetary system. This choice is crucial, for it will largely determine Estonia’s future economic performance. To break free of the ruble and of the li ngering effects of Soviet central planning, Estonia needs a stable, convertible currency.

Steve H. Hanke, Lars Jonung, and Kurt Schuler propose that Estonia establish a currency board, which would issue an Estonian currency fully convertible into Swedish currency, backed 100 percent by Swedish bonds. Sweden would aid in establishing the currency board by providing the initial reserves. The initial supply of the new Estonian currency, the kroon, would be distributed free to Estonian citizens. The authors give detailed explanations of how the currency board could be established and how it would work.