The Political Economy of Exchange Rate Policy in Latin America: An Analytical Overview

24 Pages Posted: 19 Apr 2011

See all articles by Jeffry Frieden

Jeffry Frieden

Harvard University

Ernesto Stein

Inter-American Development Bank (IDB)

Date Written: October 2000


Exchange rates have been central to the course of economic development in Latin America for decades. From the heyday of import substitution in the 1960s to the rapid expansion of foreign debt in the 1970s, from the debt crisis and its troubled aftermath in the 1980s to the rekindling of growth and borrowing in the 1990s, the exchange rate has been crucial to the mix of government policies that has shaped the region. Indeed, many analysts regard exchange rate policy as a major determinant of other economic outcomes, such as adjustment to the oil shocks of the 1970s and the debt crisis of the 1980s (Sachs, 1985). And currency policies have themselves been at the center of some of the region s most prominent economic processes and events, such as liberalizing reforms in the Southern Cone between 1976 and 1982, the Mexican crises of 1982 and 1994, Argentina s adoption of a currency board in 1991, Brazil s 1999 currency crisis, and ongoing discussions of dollarization.

Suggested Citation

Frieden, Jeffry and Stein, Ernesto Hugo, The Political Economy of Exchange Rate Policy in Latin America: An Analytical Overview (October 2000). IDB Working Paper No. 136, Available at SSRN: or

Jeffry Frieden

Harvard University ( email )

1737 Cambridge Street
Cambridge, MA 02138
United States

Ernesto Hugo Stein (Contact Author)

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue, NW
Research Department
Washington, DC 20577
United States

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