Tipos de Cambio Cuasi-fijo y Posibilidad de Crisis Financieras: Solarizar o Dolarizar la Economía Peruana?

Fixed Exchange Rates and Possibilities of Financial Crisis: Solarizar or Dollarization of Peruvian Economy?

Hernán Briceño Avalos

MPRA Paper from University Library of Munich, Germany

Abstract: This working paper has been elaborated with the aim to provide Peruvian policymakers and scholars-academics with economic related concepts and views about the best Monetary Anchor for a Central Bank to deal with control of inflation as well as to prevent them far from possibilities of undesirable financial crisis. We must acknowledge that some causes of financial crisis in developing countries and developed countries like European are very similar such as historical high Fiscal Deficit, Public Debt, excess of domestic spending regarding national income (Current Account Deficit in the Balance of Payments), Moral Hazard, on the other hand reduction of the Foreign Exchange Reserve and Gross Domestic Saving. Furthermore, all the episodes are attached with over valuation of domestic currencies regarding the US$, under the adoption of Fixed Exchange Rate regimens including the Currency Board: Argentina, Brazil, Russia, East Asian, Mexico and Chile, where this price was compelling overvalued that led finally governments to devaluate dramatically their own domestic currencies with the aim to get competitiveness. This way, these countries suffered stoppages of capital influx, capital out flux going back their original countries, contraction of their Exports, Gross Domestic Product, increasing in unemployment rates. Therefore, for emerging and/or developing economies with open markets and relatively tiny participation in the world economy, as well as without the possibility of creating a global currency is highly recommendable to keep up with Flexible Exchange Rate regimens allowing intervention of the Central Bank to deal with external adverse shocks or domestic financial problems with the aim to reduce possibilities of financial crisis.

Keywords: Financial Crisis; Monetary Anchor; Exchange Rate; Dollarization; Solarización (search for similar items in EconPapers)
JEL-codes: F02 (search for similar items in EconPapers)
Date: 2003-09
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