Official Dollarization in Latin America: Could it Work?

Paul Hallwood, Ian Marsh () and Jörg Scheibe

No 2001-06, Working papers from University of Connecticut, Department of Economics

Abstract: We investigate the case for official dollarization in a selection of Latin American countries. We argue that the monetary shock absorbers of base control, foreign exchange reserve sterilization and exchange rate policy should be retained the more volatile is a country's actual real exchange rate. Our investigation of the asymmetry of macroeconomic shocks between the USA and Latin America suggests that the time series property of the real exchange rate is likely to be one of such volatility that it is advisable to retain at least some monetary shock absorbers. The case for official dollarization is further weakened by the unlikelihood of international agreements to accommodate Federal Reserve management of the dollar base to Latin American requirements.

Keywords: dollarization; exchange rate regimes; monetary policy; Latin America. (search for similar items in EconPapers)
JEL-codes: E5 F3 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2001-08
New Economics Papers: this item is included in nep-fin, nep-ifn and nep-rmg
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:uct:uconnp:2001-06

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