The costs and benefits of fixed dollar exchange rates in Latin America
Chronic inflation and the importance of the exchange rate as a nominal anchor for the domestic price level have led some Latin American countries to consider returning to a fixed dollar exchange rate. John Welch and Darryl McLeod examine the costs and benefits of real exchange rate movements and their relevance for the credibility of inflation policies in countries now contemplating free trade agreements with the United States. ; The authors discuss the experiences of several Latin American countries and describe the problem their policy-makers face when deciding to follow either fixed or flexible exchange rate rules. Fixed exchange rates that are credible can decrease inflation rates, but only at the cost of policy flexibility in the face of adverse changes in the terms of trade or foreign interest rates. The current relative stability of international markets has led some Latin American countries to complement their stabilization and reform policies with fixed exchange rates.
Volume (Year): (1993)
Issue (Month): Jan ()
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Maurice Obstfeld., 1996.
"Destabilizing Effects of Exchange-Rate Escape Clauses,"
Center for International and Development Economics Research (CIDER) Working Papers
C96-075, University of California at Berkeley.
- Obstfeld, Maurice, 1997. "Destabilizing effects of exchange-rate escape clauses," Journal of International Economics, Elsevier, vol. 43(1-2), pages 61-77, August.
- Obstfeld, Maurice, 1991. "Destabilizing Effects of Exchange-Rate Escape Clauses," CEPR Discussion Papers 518, C.E.P.R. Discussion Papers.
- Obstfeld, Maurice, 1996. "Destabilizing Effects of Exchange-Rate Escape Clauses," Department of Economics, Working Paper Series qt15n3p5dt, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Maurice Obstfeld, 1991. "Destabilizing Effects of Exchange-Rate Escape Clauses," NBER Working Papers 3603, National Bureau of Economic Research, Inc.
- Carlos F. Diaz Alejandro, 1963. "A Note on the Impact of Devaluation and the Redistributive Effect," Journal of Political Economy, University of Chicago Press, vol. 71, pages 577.
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