And enough reserves would be held in US dollars to cover all the local currency issued by the currency board country. But, as the recent pressures on the currency boards of Argentina and Hong Kong demonstrate, even then, exchange rate uncertainty is not completely eliminated, especially at times of major global nervousness and volatility.
BIS Review 7/1999  –5–  adjustment would have to take place primarily through declines in prices and wages and the movement of labour and capital. And if those did not readily occur, the adjustment would take longer and cost more in terms of losses in output and employment.