In recent years there has been a marked shift, both in the economists' debates and the practice of economic policy, towards the more radical exchange rate regimes, such as free float on the one hand, and hard pegs - currency board and dollarisation - on the other.

The paper focuses on the currency board system, describing its underpinning principles and the constraints it imposes upon the economic policy. Those involve, primarily, a very prudent fiscal policy, a degree of wage and price flexibility, and a stable banking system. The author points to the regime's long history: currency board was common particularly between 1850 and 1950. It was rediscovered in the 1990s as helpful in restoring economic stability. This was particularly important to the countries whose own monetary policy had failed (Argentina in the 80s, where under rampant hyperinflation stabilisation programmes collapsed one by one; Bulgaria after the economic crisis and the hyperinflation of 1996-97). Another group of countries interested in currency board are those with no history of independent monetary policy at all. Here belong the post-Soviet and post-Yugoslav republics such as Estonia, Lithuania, Bosnia, Herzegovina.

Empirical data indicate that countries with the currency board system in place achieve low and stable levels of inflation. Besides, the macroeconomic parameters both preconditioning the system and resulting from it - such as low inflation, stable exchange rate and low interest rate - are undoubtedly conducive to entrepreneurship and investment, thus becoming the cornerstone of fast economic growth.