An Evaluation of Monetary Regime Options for Latin America

By Andrew Berg, Paolo Mauro, Eduardo Borensztein

December 1, 2002

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Andrew Berg, Paolo Mauro, and Eduardo Borensztein. An Evaluation of Monetary Regime Options for Latin America, (USA: International Monetary Fund, 2002) accessed September 20, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

We assess monetary regime options for Latin American countries. The costs of a common currency are likely to outweigh its benefits, as those countries face diverse economic shocks, do not trade much with each other, and are affected by common international financial shocks only to the same extent as the average pair of emerging markets. Unilateral dollarization would be desirable only for those countries where there are strong links to the U.S. economy, the credibility of the monetary authorities is irreversibly lost, and there is keen demand for dollar-denominated financial assets. Finally, some countries in the region seem to be good candidates for meaningful and useful floating.

Subject: Currencies, Emerging and frontier financial markets, Exchange rate arrangements, Exchange rates, Floating exchange rates, Foreign exchange, Inflation, Money, Prices

Keywords: Central America, Common currency, Country, Currencies, Currency union, Dollarization, East Asia, Exchange rate, Exchange rate arrangements, Exchange rate regimes, Exchange rates, Floating exchange rate regime, Floating exchange rates, Inflation, Inflation pass-through, Inflation rate, Inflation stabilization objective, Nominal interest rate, Regime, South America, Unit of account, Western Europe, WP

Publication Details

Pages:

40
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2002/211
Stock No:

WPIEA2112002
ISBN:

9781451874853
ISSN:

1018-5941

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