An Evaluation of Monetary Regime Options for Latin America

41 Pages Posted: 14 Feb 2006

See all articles by Andrew Berg

Andrew Berg

International Monetary Fund (IMF) - Developing Country Studies Division

Eduardo Borensztein

Inter-American Development Bank (IADB)

Paolo Mauro

International Monetary Fund (IMF)

Date Written: December 2002

Abstract

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.

Keywords: exchange rate regimes, currency union, dollarization

JEL Classification: F31, F33, F41

Suggested Citation

Berg, Andrew and Borensztein, Eduardo and Mauro, Paolo, An Evaluation of Monetary Regime Options for Latin America (December 2002). IMF Working Paper No. 02/211, Available at SSRN: https://ssrn.com/abstract=880880

Andrew Berg (Contact Author)

International Monetary Fund (IMF) - Developing Country Studies Division ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-8843 (Phone)
202-589-8843 (Fax)

Eduardo Borensztein

Inter-American Development Bank (IADB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

Paolo Mauro

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States