Dollarization in Latin America: Wave of the Future or Flight to the Past?

Latin American economic policy during the 1990s was guided by the Washington consensus, which embodied the orthodox model's espousal of free trade and economic liberalization. Macroeconomic performance improved over the lost decade of the 1980s, aided by new capital inflows. A model is used to...

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Bibliographic Details
Published inJournal of economic issues Vol. 37; no. 3; pp. 643 - 663
Main Author Jameson, Kenneth P.
Format Journal Article
LanguageEnglish
Published Lincoln Routledge 01.09.2003
Association for Evolutionary Economics
Subjects
Central banks
Currency
Dollar standard
Dollarization
Economic policy
Financial economics
Foreign exchange rates
Gross domestic product
International economics
International financial institutions
Macroeconomics
Monetary theory
Sharing economy
Studies
Latin America
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Summary:Latin American economic policy during the 1990s was guided by the Washington consensus, which embodied the orthodox model's espousal of free trade and economic liberalization. Macroeconomic performance improved over the lost decade of the 1980s, aided by new capital inflows. A model is used to characterize Latin America's international financial relations as a dollar bloc, an informal but powerful system that binds their currencies to the dominant currency, the dollar Dollarization is placed in historical context, since dollarization is path dependent. The most extreme contemporary dollarization program, that of Ecuador, is examined. It is concluded that dollarization will not become a policy of choice for dealing with the problems of exchange rate instability unless the major international players begin to push and support that policy.
ISSN:0021-3624
1946-326X
DOI:10.1080/00213624.2003.11506607