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A Proposal of Monetary Reform for Argentina: Flexible Dollarization and Free Banking

The Independent Review (Forthcoming)

47 Pages Posted: 14 Jan 2014 Last revised: 3 Jul 2014

Nicolas Cachanosky

Metropolitan State University of Denver

Adrian O. Ravier

Universidad Francisco Marroquín

Date Written: June 11, 2014

Abstract

Argentina’s economy and monetary institutions are, once again, experiencing a serious crisis. In this document, we propose a monetary reform for Argentina that consists of flexible dollarization plus a free banking regime. By flexible dollarization, we mean that the peso should be replaced with the U.S. dollar as a first step, but the market should have the freedom to interact with any selected currency. Therefore, the country does not become attached the U.S. dollar; on the contrary, it becomes a free currency country. By free banking, we mean giving financial institutions permission to issue their own banknotes convertible into U.S. dollars or any other currency or commodity of their choice.

It should be noted that the problems of the Argentine economy go beyond those of monetary policy. This proposal should not be understood as a sufficient reform to fix the Argentinean economy but as a necessary one. This proposal should also not be understood as a monetary panacea but as a monetary framework that is still superior to one provided by the Argentine central bank BCRA and Argentine policy makers to their country.

Keywords: Argentina, dollarization, free banking, monetary reform

JEL Classification: E50, E60

Suggested Citation

Cachanosky, Nicolas and Ravier, Adrian O., A Proposal of Monetary Reform for Argentina: Flexible Dollarization and Free Banking (June 11, 2014). The Independent Review (Forthcoming). Available at SSRN: https://ssrn.com/abstract=2378541 or http://dx.doi.org/10.2139/ssrn.2378541

Nicolas Cachanosky (Contact Author)

Metropolitan State University of Denver ( email )

Denver, CO 80217
United States

HOME PAGE: http://www.ncachanosky.edu

Adrian O. Ravier

Universidad Francisco Marroquín ( email )

Escuela de Negocios
Calle Manuel F. Ayau (6 Calle final), zona 10
Guatemala, 01010
Guatemala

HOME PAGE: http://www.adrianravier.com

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