Post-Pandemic Inflation and Currency Board Arrangements in the Balkans

ABSTRACT Maintaining monetary stability is the first and fundamental objective of the currency board regime, especially after political and economic crises such as the one in the Balkans in the 1990s. The very limited role of the central bank has disciplined financial institutions and governments, but at the same time is not conducive to long-term growth and employment. This policy ties the domestic currency to the ‘peg’ currency, leading to inflationary tendencies in the country whose currency is used as the ‘peg’. Currently, the high inflation rates are caused by the pandemic crisis, but also by the war in Ukraine. This paper analyses the causes of inflation in Bosnia and Herzegovina and Bulgaria as countries with currency boards. The results show that inflation in these two countries is ‘imported inflation’ from two points of view: the monetary policy of the European Central Bank and the inflation trend in the EMU, but mainly due to the Ukraine crisis and consequently the energy and food crisis.