With Lebanon going through hyperinflation, some economists have deemed the establishment of a currency board (CB) necessary to help curb inflation. To better assess the possible establishment of a CB, and its probable effect on the Lebanese monetary situation, Executive Magazine talked to Steve Hanke, professor of Applied Economics at Johns Hopkins University and one of the world’s leading experts on hyperinflation and exchange-rate systems, particularly CBs and dollarized systems. Professor Hanke is the architect of CB systems installed in Estonia, Lithuania, Bulgaria, and Bosnia and Herzegovina between 1992 and 1998; he currently sits on the Board of Directors of the United States National Board for Education Sciences. 1) Could you please start by explaining the mechanism of a CB, as opposed to the central banking mechanism? A currency board issues, notes, and coins convertible on demand into a foreign anchor currency at a fixed rate of exchange. As reserves,
