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Hard peg and monetary unions.Main lessons from the Argentine experience

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  • Carrera, Jorge Eduardo

Abstract

Currency board (CB) was a corner solution for Argentine hyperinflation, however its balance is controversial. How does a CB work as a long run regime? After evaluating the result of ten years CB regime, we obtain important lessons for a monetary union and for dollarization proposals. We discuss: 1) the capacity of such a regime to deal with real and nominal volatility, 2) fiscal problems and debt dynamics, 3) financial problems under currency substitution, 4) CB regime compared with dollarization and 5) the feasibility of a single–peg CB in a flexible exchange rate world.

Suggested Citation

  • Carrera, Jorge Eduardo, 2004. "Hard peg and monetary unions.Main lessons from the Argentine experience," MPRA Paper 7843, University Library of Munich, Germany, revised 2007.
    • Handle: RePEc:pra:mprapa:7843
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    File URL: https://mpra.ub.uni-muenchen.de/7843/1/MPRA_paper_7843.pdf
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    References listed on IDEAS

    as
    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. Andrew Berg & Eduardo Borensztein, 2000. "The Choice of Exchange Rate Regime and Monetary Target in Highly Dollarized Economies," Journal of Applied Economics, Taylor & Francis Journals, vol. 3(2), pages 285-324, November.
    3. Mr. Charles Enoch & Mr. Tomás J. T. Baliño, 1997. "Currency Board Arrangements: Issues and Experiences," IMF Occasional Papers 1997/005, International Monetary Fund.
    4. Tornell, Aaron & Velasco, Andres, 2000. "Fixed versus flexible exchange rates: Which provides more fiscal discipline?," Journal of Monetary Economics, Elsevier, vol. 45(2), pages 399-436, April.
    5. Robert Mundell, 2000. "Currency Areas, Exchange Rate Systems and International Monetary Reform," Journal of Applied Economics, Universidad del CEMA, vol. 3, pages 217-256, November.
    6. Ricardo J. Caballero, 2000. "Macroeconomic Volatility in Latin America: A Conceptual Framework and Three Case Studies," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2000), pages 31-107, August.
    7. John Williamson, 1995. "What Role of Currency Boards?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number pa40, July.
    8. Enrique Alberola & Luis Molina, 2000. "Fiscal Discipline and Exchange Rate Regimes: a Case for Currency Boards?," Working Papers 0006, Banco de España.
    9. Andrés VELASCO, 2000. "Exchange-Rate Policies For Developing Countries: What Have We Learned? What Do We Still Not Know?," G-24 Discussion Papers 5, United Nations Conference on Trade and Development.
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    Cited by:

    1. Jorge Carrera & Guillermo Vuletin, 2003. "The Effects of Exchange Rate Regimes on Real Exchange Rate Volatility. A Dynamic Panel Data Approach," Anais do XXXI Encontro Nacional de Economia [Proceedings of the 31st Brazilian Economics Meeting] c67, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    2. Jorge Carrera & Romain Restout, 2008. "Long Run Determinants of Real Exchange Rates in Latin America," Working Papers 0811, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    3. Sell, Friedrich L., 2004. "Währungspolitik im Dienste von Entwicklung: Immer noch ein Forschungsprogramm!," Working Papers in Economics 2004,2, Bundeswehr University Munich, Economic Research Group.
    4. Carrera, Jorge Eduardo & Cicowiez, Martín & Lacunza, Hernán & Saavedra, Marcelo, 2005. "Interdependencia y regímenes cambiarios en Mercosur: un modelo macroeconómico de equilibrio general computado para su medición [Interdependence under different exchange rate regimes in the Mercosur," MPRA Paper 7845, University Library of Munich, Germany, revised 2005.

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    More about this item

    Keywords

    Currency board; Dollarization; Monetary union; Fiscal policy and Monetary policy;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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