Should Argentina Adopt The US Dollar?
A popular suggestion among emerging or transition economies is to 'dollarize' or 'euro-ize'; that is to adopt the currency of a larger, richer neighbour in order to import the monetary discipline and financial stability of that neighbour. This paper examines the pros and cons of that suggestion in Argentina, where it has become a serious political concern. We argue that the usual Optimal Currency Area criteria, while important, may not be the dominant consideration where a currency board, or where exchange rate fixing or stabilization, is the natural alternative. This is because such a fixing arrangement creates risk premia against the possibility that the exchange rate parity cannot be maintained, and against the possibility that the domestic economy will be unable or unwilling to fund the bonds, securities or reserves used to back the domestic currency issue. We find the growth and investment benefits of removing the risk premia outweigh any optimal currency area difficulties. But that produces its own difficulties in that there may be a conflict between the need to develop an economy's real side, which depends on the optimal currency area criteria, and the conditions of financial stability needed to realize that developments depend on the discipline effects from outside that currency area.
|Date of creation:||Apr 2000|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
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.:
- Auernheimer, Leonardo, 1974. "The Honest Government's Guide to the Revenue from the Creation of Money," Journal of Political Economy, University of Chicago Press, vol. 82(3), pages 598-606, May/June.
- Daniel Gros & Guyvandille, 1995.
"Seigniorage and EMU: The Fiscal Implications of Price Stability and Financial Market Integration,"
Journal of Common Market Studies,
Wiley Blackwell, vol. 33(2), pages 175-196, 06.
- Gros, Daniel, 1993. "Seigniorage and EMU : The fiscal implications of price stability and financial market integration," European Journal of Political Economy, Elsevier, vol. 9(4), pages 581-601, November.
- Herrendorf, Berthold, 1997. " Time Consistent Collection of Optimal Seigniorage: A Unifying Framework," Journal of Economic Surveys, Wiley Blackwell, vol. 11(1), pages 1-46, March.
- Frankel, Jeffrey A & Rose, Andrew K, 1998.
"The Endogeneity of the Optimum Currency Area Criteria,"
Royal Economic Society, vol. 108(449), pages 1009-25, July.
- Frankel, Jeffrey A & Rose, Andrew K, 1996. "The Endogeneity of the Optimum Currency Area Criteria," CEPR Discussion Papers 1473, C.E.P.R. Discussion Papers.
- Jeffrey A. Frankel & Andrew K. Rose, 1996. "The Endogeneity of the Optimum Currency Area Criteria," NBER Working Papers 5700, National Bureau of Economic Research, Inc.
- Robert J. Barro, 1982.
"Measuring the Fed's Revenue from Money Creation,"
NBER Working Papers
0883, National Bureau of Economic Research, Inc.
- Fischer, Stanley, 1982. "Seigniorage and the Case for a National Money," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 295-313, April.
- Giavazzi, Francesco & Pagano, Marco, 1988.
"The advantage of tying one's hands : EMS discipline and Central Bank credibility,"
European Economic Review,
Elsevier, vol. 32(5), pages 1055-1075, June.
- Francesco Giavazzi & Marco Pagano, 1991. "The Advantage of Tying One's Hands: EMS Discipline and Central Bank Credibility," NBER Chapters, in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 303-330 National Bureau of Economic Research, Inc.
- Giavazzi, Francesco & Pagano, Marco, 1986. "The Advantages of Tying One's Hands: EMS Discipline and Central Bank Credibility," CEPR Discussion Papers 135, C.E.P.R. Discussion Papers.
- Bayoumi, Tamim & Eichengreen, Barry, 1996. "Operationalizing the Theory of Optimum Currency Areas," CEPR Discussion Papers 1484, C.E.P.R. Discussion Papers.
- Klein,Martin & Neumann,Manfred, . "Seignorage: What is it and who gets it?," Discussion Paper Serie B 124, University of Bonn, Germany.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:2412. 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: ()
If references are entirely missing, you can add them using this form.