What is a currency board and how does it work? A currency board is a country’s monetary organization that works like a central bank with the aim of setting up a fixed exchange rate with another country. A currency board integrates three basics: a fixed exchange rate to a specific foreign currency, an automatic exchange using the fixed rate, and a sustainable commitment to the monetary structure. Laws governing the operation of a currency board are set through the central bank policies. Countries implement a currency board with the aim of having a feasible anti-inflationary policy. This system can be implemented alone or integrated with the central bank; but having both monetary authorities is uncommon. The specific foreign currency, also known as the “anchor currency”, is deemed to be a popular currency such as the U.S dollar and euro. In this sense, the value and constancy of the local currency depends on the value and constancy of the anchor currency. This implies that a currency board strives to eliminate the central bank from its optional function of regulating money distribution and interest rates. A currency board structure can be effective if there are enough foreign exchange reserves within the capacity of the central bank, such that insufficient supply of funds might be covered. Thus, there must be at least 100% of reserve currency and a sustainable pledge to the local currency by the currency board. Besides, a currency board does not hold funds that generate interests and thus it is not entirely considered a lender of last resort as in the case of a central bank. What good effects might be expected from a currency board? Having a currency board as an exchange rate policy would lead to several economic advantages. Economic integrity, low inflation, and sustainable interest rates are the major good effects of this system to the new government of a small African nation. Since there is an official foreign exchange reserves, financial institutions and citizens can be assured that there is currency stability between domestic and foreign currency. The demand for an anchored currency will be higher than that of unstable currencies since the interested parties know that their funds can be simply changed into an internationally-traded currency despite of factors that affect exchange rates. Factors such as different monetary policies between countries are deemed to affect exchange rates. But with a currency board in place, a country is in, real sense, not in control of its monetary policy. Good effects of currency board can be attributed to the countries that have successfully implemented the system. For instance, countries such as Argentina and Bulgaria have successfully implemented currency board in their economic policy. Thus, the African nation in question should opt to peg the currency to the dollar with a currency board system because independent monetary policy for the small nation can be difficult to maintain. Besides, currency board systems managed by various nations have faired well as compared to other fixed exchange rate policies. For instance, currency board within an economic system is deemed to reduce annual inflation by 3.5%; this is due to the higher demand of “currency board currency”. What problems might arise if a currency board i