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Monetary Systems in Developing Countries: An Unorthodox View

  • Cordeiro, Jose Luis

This paper analyzes some recent theoretical and practical evidence in terms of economic results of different exchange rate systems. It begins with a historical review and a summary of fixed versus flexible exchange rate systems. Then it compares the experiences of recent currency unions, mostly unilateral, and their relative economic performance during the past currency crises in Latin America, East Asia and Eastern Europe. A set of issues is discussed in order to weigh the overall costs and benefits for several economies. These issues include exchange rates, GDP performance, inflation rates and foreign reserves. The case of Argentina is also considered separately, comparing mostly seigniorage costs and interest-rate savings. The benefits and costs of the producers (central banks/governments) and the consumers (citizens) of money are discussed separately. Free banking is also considered in a fast-changing world where there will probably be fewer but better currencies. Not just the euro is a reality now, but maybe the "amero" and the "worldo" or the "mondo" very soon.

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Paper provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its series IDE Discussion Papers with number 154.

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Date of creation: May 2008
Date of revision:
Publication status: Published in IDE Discussion Paper. No. 154. 2008.5
Handle: RePEc:jet:dpaper:dpaper154
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  2. Eichengreen, Barry, 1998. "Does Mercosur Need a Single Currency?," Center for International and Development Economics Research, Working Paper Series qt6fw631qn, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
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  9. Richard N. Cooper, 1999. "Exchange rate choices," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 43(Jun), pages 99-136.
  10. Ricardo Hausmann & Michael Gavin & Carmen Pagés-Serra & Ernesto H. Stein, 1999. "Financial Turmoil and Choice of Exchange Rate Regime," Research Department Publications 4170, Inter-American Development Bank, Research Department.
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  18. Richard N. Cooper, 1999. "Exchange Rate Choices," Harvard Institute of Economic Research Working Papers 1877, Harvard - Institute of Economic Research.
  19. Zeljko Bogetic, 2005. "Full Dollarization: Fad or Future? Challenge (March 2000)," International Finance 0510007, EconWPA.
  20. 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.
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  25. José Luis Cordeiro, 2009. "El Desafío Latinoamericano," Observatorio de la Economía Latinoamericana, Grupo (Universidad de Málaga), issue 113, april.
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