Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/299065 
Authors: 
Year of Publication: 
2023
Citation: 
[Journal:] Journal of Central Banking Theory and Practice [ISSN:] 2336-9205 [Volume:] 12 [Issue:] 1 [Year:] 2023 [Pages:] 149-174
Publisher: 
Sciendo, Warsaw
Abstract: 
The Currency Board in Bosnia and Herzegovina (BiH) uses the euro as a reserve currency in the conditions of a negative nominal interest rate on deposits with the ECB. In this paper, we investigated the impact of negative interest rates on deposits and negative yields on bonds denominated in euro on the general advantages of the currency board and the consequences for the functioning of the currency board in BiH. The impact of negative interest rates was measured by the currency board coverage index (IC). A negative nominal interest rate on the reserve currency creates a negative seigniorage in the country of the currency board, increases the costs of issuing domestic money and reduces the competitiveness of the economy. The monetary policy of the ECB in the conditions of the COVID-19 crisis generates negative influences on the functioning of the currency board. The COVID-19 crisis poses a threat to currency board coverage in BiH. Technically, a currency board can also function in terms of negative interest on the invested reserve currency as long as it can cover the costs of its business.
Subjects: 
currency board
negative nominal interest rate
currency board coverage index
reserve currency
seigniorage
JEL: 
E42
E49
E50
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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