Palau is divided into sixteen administrative regions, called states (the still separately listed Rock Islands did originally not belong to any state, but now belong to the state of Koror).
Melekeok is a city in the island country of Palau. It has served as Palau's capital city since 2006, despite its small population of about 250 people. It is the smallest national capital in the world by population.
Palau uses the U.S. dollar as its currency. This has the advantage of bypassing the expense of running a central bank. Also, the currency is completely convertible, and price stability is reasonably well ensured, as Palau does not have the ability to print currency. The rate of inflation was less than 3 percent a year from 1996-98.