The prime minister of Estonia notes that while currency board-type monetary

policies may limit central bank flexibility, they “deflect political pressures” and

“preclude colossal mistakes, which at the present stage of transition is much

more important (than flexibility). Estonia adopted a quasi-currency board regime

for exchange and monetary policy. The monetary base is backed by gold and

hard currency. In addition, legislation protects independence by prohibiting

central bank provision of credit to the government and by shielding the governor

and board from arbitrage dismissal. Indeed the Estonian central bank governor

Siim Kallas survived several changes of government. Estonia boasts that its

currency board and central bank independence account in part for its great

success in attracting foreign direct investment.