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Mr. Prakash Loungani

The number of independent economies in the world has increased from about 75 at the end of World War II to nearly 200 today. Do they all need separate currencies and independent monetary policies? Economists suggest the answer is no and are busy matchmaking to see what currency unions may be desirable among the 200 economies. In an IMF Institute seminar on April 6, Robert Barro—drawing on his work with Alberto Alesina—discussed the benefits and costs to a country of joining a currency union.

Mr. Eduardo Borensztein and Mr. Andrew Berg

Abstract

Analyse les avantages et les inconvénients de la dollarisation intégrale, ou de l'adoption par un pays de la monnaie d'un autre pays. Les avantages potentiels sont notamment l'abaissement des coûts d'emprunt et la plus grande intégration avec les marchés mondiaux. Mais les pays perdent la possibilité de dévaluer leur monnaie et deviennent dépendants des États-Unis. Comparaison avec l'option d'une caisse d'émission.

Mr. Eduardo Borensztein and Mr. Andrew Berg

Abstract

Analyzes the costs and benefits of full dollarization, or the adoption by one country of another country’s currency. Potential advantages include lower borrowing costs and deeper integration into world markets. But countries lose the ability to devalue, and become dependent on the U.S. Compares with currency board option.

Mr. Eduardo Borensztein and Mr. Andrew Berg

Abstract

Analyzes the costs and benefits of full dollarization, or the adoption by one country of another country’s currency. Potential advantages include lower borrowing costs and deeper integration into world markets. But countries lose the ability to devalue, and become dependent on the U.S. Compares with currency board option.

Mr. Eduardo Borensztein and Mr. Andrew Berg

Abstract

Analyzes the costs and benefits of full dollarization, or the adoption by one country of another country’s currency. Potential advantages include lower borrowing costs and deeper integration into world markets. But countries lose the ability to devalue, and become dependent on the U.S. Compares with currency board option.

Mr. Eduardo Borensztein and Mr. Andrew Berg

Abstract

Analyzes the costs and benefits of full dollarization, or the adoption by one country of another country’s currency. Potential advantages include lower borrowing costs and deeper integration into world markets. But countries lose the ability to devalue, and become dependent on the U.S. Compares with currency board option.

International Monetary Fund. Western Hemisphere Dept.
Panama’s extensive trade and financial linkages make it vulnerable to adverse external shocks, and this would have a sizable impact on Panama’s real activity. In the absence of monetary policy, macroprudential policy tools could usefully complement microprudential tools. A macroprudential supervisory body must possess the ability or power to collect and analyze firm-, market-, and global-level data to detect risks before they develop into full-blown crises. This study analyzes Panama’s tax structure, performance, and administration in order to identify priority areas for further strengthening
Mr. Eduardo Borensztein and Mr. Andrew Berg
We analyze the costs and benefits of full dollarization compared to its closest alternative, a currency board, quantifying for Argentina where possible. Potential advantages include lower borrowing costs and deeper integration into world markets. One cost is the transfer of seigniorage to the United States. The country may also lose the “exit option” to devalue in the face of major shocks. Similarly, even a country with a currency board may lose some ability to act as lender of last resort to the banking system. We review how various country characteristics influence the balance of arguments.
International Monetary Fund. External Relations Dept.

Agrowing number of countries are choosing to give up their monetary independence to join currency unions, establish a currency board, or dollarize. Recent work by Robert Barro and Alberto Alesina of Harvard University has examined what is behind this trend, notably the decision to join a currency union. Both were recently at the IMF Institute to offer in-house seminars. Prakash Loungani talks with Alesina about why fewer currencies may be a healthy development. The accompanying box summarizes Barro’s seminar on how countries can calculate the costs and benefits of joining a currency union.

Mr. Eduardo Borensztein and Mr. Andrew Berg

Abstract

Analiza los costos y beneficios de la plena dolarización, o de la adopción de la moneda de otro país. La reducción de los costos de endeudamiento y una integración más profunda en los mercados mundiales son posibles ventajas. Pero el país pierde la posibilidad de devaluar su moneda, y pasa a depender de Estados Unidos. Es comparable a un régimen de caja de conversión o convertibilidad.