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An Evaluation of Monetary Regime Options for Latin America

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  • Andrew Berg
  • Paolo Mauro
  • Eduardo Borensztein

Abstract

We assess monetary regime options for Latin American countries. The costs of a common currency are likely to outweigh its benefits, as those countries face diverse economic shocks, do not trade much with each other, and are affected by common international financial shocks only to the same extent as the average pair of emerging markets. Unilateral dollarization would be desirable only for those countries where there are strong links to the U.S. economy, the credibility of the monetary authorities is irreversibly lost, and there is keen demand for dollar-denominated financial assets. Finally, some countries in the region seem to be good candidates for meaningful and useful floating.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/211.

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Length: 40
Date of creation: 01 Dec 2002
Date of revision:
Handle: RePEc:imf:imfwpa:02/211

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Keywords: Exchange rate regimes; Dollarization; exchange rate; inflation; monetary policy; real exchange rate; exchange rates; exchange rate regime; terms of trade; foreign exchange; foreign currency; floating exchange rate; inflation rate; currency areas; inflation targeting; intermediate exchange rate; currency unions; real interest rates; floating exchange rates; exchange rate flexibility; exchange rate movements; real interest rate; terms of trade shocks; nominal exchange rate; monetary aggregate; price level; exchange rate policy; currency boards; low inflation; exchange rate fluctuations; fixed exchange rates; rate of inflation; real variables; exchange rate crisis; high inflation; effective exchange rate; inflation target; relative price; exchange rate pegs; relative prices; floating exchange rate regimes; floating exchange rate regime; lower inflation; exchange arrangements; exchange rate depreciations; real effective exchange rate; inflation stabilization; exchange restrictions; monetary institutions; exchange rate system; foreign exchange reserves; increase in interest rates; exchange rate passes; exchange rate expectations; foreign exchange markets; intermediate exchange rate regimes; exchange rate volatility; fixed exchange rate; exchange rate levels; exchange markets; foreign exchange market; exchange rate peg; forward exchange rates; aggregate demand; exchange rate arrangements; real exchange rate movements; nominal interest rates; exchange rate policies; exchange rate adjustments; macroeconomic stability; expectations of inflation; exchange rate appreciation; real rates; exchange rate adjustment; exchange rate commitment; exchange rate crises; flexible exchange rate; high interest rates; exchange rate devaluations; money growth; flexible exchange rate regime; money supply; forward exchange; nominal interest rate; exchange rate pass; inflation tax;

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References

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