Photo from UNIAN
An effective way of curbing inflation in the country is to switch to the so-called 'currency board' policy, said Simeon Djankov, the creator of the Doing Business series, in an interview with Ukrainian magazine Novoye Vremya.
As Ukraine is going to expand its trade relations with Europe, it is reasonable to peg the hryvnia to the euro, according to Djankov. He believes it is necessary to adopt a law, according to which the hryvnia will be pegged to the euro for as long as the eurozone exists.
Djankov stressed the International Monetary Fund opposed the idea to be implemented in a number of countries in the region.
He noted that Estonia and Bulgaria had managed to bring inflation to zero level in two or three months, having put currency boards in place.
A currency board does not attempt to manipulate interest rates by establishing a discount rate like a central bank. The peg with the foreign currency tends to keep interest rates and inflation very closely aligned to those in the country against whose currency the peg is fixed. Estonia did it in 1992-1993. Lithuania, Latvia, Bulgaria, and a number of countries in the region followed suit, which brought positive results, according to the expert.