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Tipos de Cambio Cuasi-fijo y Posibilidad de Crisis Financieras: Solarizar o Dolarizar la Economía Peruana?
[Fixed Exchange Rates and Possibilities of Financial Crisis: Solarizar or Dollarization of Peruvian Economy?]

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Author Info

  • Briceño Avalos, Hernán Ricardo

Abstract

This working paper has been elaborated with the aim to provide Peruvian policymakers and scholars-academics with economic related concepts and views about the best Monetary Anchor for a Central Bank to deal with control of inflation as well as to prevent them far from possibilities of undesirable financial crisis. We must acknowledge that some causes of financial crisis in developing countries and developed countries like European are very similar such as historical high Fiscal Deficit, Public Debt, excess of domestic spending regarding national income (Current Account Deficit in the Balance of Payments), Moral Hazard, on the other hand reduction of the Foreign Exchange Reserve and Gross Domestic Saving. Furthermore, all the episodes are attached with over valuation of domestic currencies regarding the US$, under the adoption of Fixed Exchange Rate regimens including the Currency Board: Argentina, Brazil, Russia, East Asian, Mexico and Chile, where this price was compelling overvalued that led finally governments to devaluate dramatically their own domestic currencies with the aim to get competitiveness. This way, these countries suffered stoppages of capital influx, capital out flux going back their original countries, contraction of their Exports, Gross Domestic Product, increasing in unemployment rates. Therefore, for emerging and/or developing economies with open markets and relatively tiny participation in the world economy, as well as without the possibility of creating a global currency is highly recommendable to keep up with Flexible Exchange Rate regimens allowing intervention of the Central Bank to deal with external adverse shocks or domestic financial problems with the aim to reduce possibilities of financial crisis.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 42029.

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Date of creation: Sep 2003
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Handle: RePEc:pra:mprapa:42029

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Related research

Keywords: Financial Crisis; Monetary Anchor; Exchange Rate; Dollarization; Solarización;

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  1. Robert J. Barro & David B. Gordon, 1981. "A Positive Theory of Monetary Policy in a Natural-Rate Model," NBER Working Papers 0807, National Bureau of Economic Research, Inc.
  2. Felipe Morandé & Matías Tapia, 2002. "Exchange Rate Policy in Chile: From the Band to Floating and Beyond," Working Papers wp192, University of Chile, Department of Economics.
  3. Cipollini, A. & Kapetanios, G., 2009. "Forecasting financial crises and contagion in Asia using dynamic factor analysis," Journal of Empirical Finance, Elsevier, vol. 16(2), pages 188-200, March.
  4. Steven Radelet & Jeffrey Sachs, 1998. "The Onset of the East Asian Financial Crisis," NBER Working Papers 6680, National Bureau of Economic Research, Inc.
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