IDEAS home Printed from https://ideas.repec.org/a/fip/fedder/y1993ijanp31-44.html
   My bibliography  Save this article

The costs and benefits of fixed dollar exchange rates in Latin America

Author

Listed:
  • John H. Welch
  • Darryl McLeod

Abstract

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.

Suggested Citation

  • John H. Welch & Darryl McLeod, 1993. "The costs and benefits of fixed dollar exchange rates in Latin America," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Jan, pages 31-44.
  • Handle: RePEc:fip:fedder:y:1993:i:jan:p:31-44
    as

    Download full text from publisher

    File URL: http://www.dallasfed.org/assets/documents/research/er/1993/er9301c.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Obstfeld, Maurice, 1997. "Destabilizing effects of exchange-rate escape clauses," Journal of International Economics, Elsevier, vol. 43(1-2), pages 61-77, August.
    2. 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 577-577.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Welch, John H., 1996. "Capital flows and economic growth: Reflections on Latin America in the 1990s," The Quarterly Review of Economics and Finance, Elsevier, vol. 36(Supplemen), pages 101-114.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedder:y:1993:i:jan:p:31-44. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Amy Chapman). General contact details of provider: http://edirc.repec.org/data/frbdaus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.