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Exchange Rate Regimes in the Americas: Is Dollarization the Solution?

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  • Vittorio Corbo

Abstract

The series of crises, which have affected emerging markets in recent years, have reopened the debate on the most appropriate exchange regime for an emergent economy. In particular, all countries that experienced severe crises in the 1990s had some sort of fixed exchange rate regime, the majority of them falling in the categories that Corden (2002) calls fixed-but-adjustable exchange rate regime (FBAR) and in between regimes of the pegged (including flexible and crawling pegs) and target zone types. As a result, in recent years countries have been emigrating to a corner solution: a credible fixed regime or a floating regime with a monetary anchor. Within the latter categories, the increasingly used monetary regime is the inflation targeting one. The paper discusses the advantages and disadvantages of alternative exchange rate regimes and ends with a discussion of the possibility of dollarization in the Americas.

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Bibliographic Info

Paper provided by Instituto de Economia. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 229.

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Date of creation: 2002
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Handle: RePEc:ioe:doctra:229

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Keywords: Exchange rate systems; inflation targeting; dollarization;

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References

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  1. Jeffrey A. Frankel, 1999. "No Single Currency Regime is Right for All Countries or At All Times," NBER Working Papers 7338, National Bureau of Economic Research, Inc.
  2. Juan Andrés Fontaine & Rodrigo Vergara, 2000. "¿Debe Chile Dolarizar?," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 37(110), pages 227-240.
  3. Svensson, Lars E O, 1998. "Open-Economy Inflation Targeting," CEPR Discussion Papers 1989, C.E.P.R. Discussion Papers.
  4. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear Of Floating," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 379-408, May.
  5. Stanley Fischer, 2001. "Exchange Rate Regimes: Is the Bipolar View Correct?," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 3-24, Spring.
  6. Ben S. Bernanke & Frederic S. Mishkin, 1997. "Inflation Targeting: A New Framework for Monetary Policy?," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 97-116, Spring.
  7. Barry Eichengreen, 1992. "Golden Fetters: The Gold Standard and the Great Depression, 1919-1939," NBER Books, National Bureau of Economic Research, Inc, number eich92-1, July.
  8. Agustín Carstens & Alejandro Werner, 2000. "Monetary Policy and Exchange Rate Choices for Mexico," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 37(110), pages 139-175.
  9. Andrés Elberg & Vittorio Corbo & José Tessada, 1999. "Monetary Policy in Latin America: Underpinnings and Procedures," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 36(109), pages 897-927.
  10. Carmen M. Reinhart & Kenneth S. Rogoff, 2002. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," NBER Working Papers 8963, National Bureau of Economic Research, Inc.
  11. Lawrence H. Summers, 2000. "International Financial Crises: Causes, Prevention, and Cures," American Economic Review, American Economic Association, vol. 90(2), pages 1-16, May.
  12. Felipe Morandé & Klaus Schmidt-Hebbel, 2000. "Chile's Peso: Better Than (Just) Living with the Dollar?," Working Papers Central Bank of Chile 68, Central Bank of Chile.
  13. Jonathan David Ostry & Anne Marie Gulde & Atish R. Ghosh & Holger C. Wolf, 1995. "Does the Nominal Exchange Rate Regime Matter?," IMF Working Papers 95/121, International Monetary Fund.
  14. Sebastian Edwards, 1999. "How Effective Are Capital Controls?," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 65-84, Fall.
  15. Jose Manuel Campa & Linda S. Goldberg, 2002. "Exchange rate pass-through into import prices: a macro or micro phenomenon?," Staff Reports 149, Federal Reserve Bank of New York.
  16. Andrew Berg & Paolo Mauro & Michael Mussa & Alexander K. Swoboda & Esteban Jadresic & Paul R. Masson, 2000. "Exchange Rate Regimes in an Increasingly Integrated World Economy," IMF Occasional Papers 193, International Monetary Fund.
  17. Campa, José Manuel, 1990. "Exchange Rates and Economic Recovery in the 1930s: An Extension to Lation America," The Journal of Economic History, Cambridge University Press, vol. 50(03), pages 677-682, September.
  18. Reinhart, Carmen & Reinhart, Vincent, 2001. "What hurts most?: G-3 exchange rate or interest rate volatility," MPRA Paper 14098, University Library of Munich, Germany.
  19. Eduardo Levy & Federico Sturzenegger, 2000. "Is EMU a Blueprint for Mercosur?," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 37(110), pages 63-99.
  20. Ben S. Bernanke, 1994. "The Macroeconomics of the Great Depression: A Comparative Approach," NBER Working Papers 4814, National Bureau of Economic Research, Inc.
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Cited by:
  1. Stefan Krause & Fabio Mendez, 2005. "Institutions, Arrangements, and Preferences for Inflation Stability: Evidence and Lessons from a Panel Data Analysis," Emory Economics 0501, Department of Economics, Emory University (Atlanta).
  2. Fujiki, Hiroshi & Watanabe, Kiyoshi, 2003. "Effects of External Debt on Domestic Resource Allocation in a Small Open Economy with Limited Access to the World Capital Market," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 21(4), pages 21-56, December.
  3. Juthathip Jongwanich, 2006. "Exchange Rate Regimes, Capital Account Opening and Real Exchange Rates: Evidence from Thailand," Departmental Working Papers 2006-01, The Australian National University, Arndt-Corden Department of Economics.
  4. Aloy, Marcel & Moreno-Dodson, Blanca & Nancy, Gilles, 2008. "Intertemporal adjustment and fiscal policy under a fixed exchange rate regime," Policy Research Working Paper Series 4607, The World Bank.

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