Front Matter Page
Research Department
Contents
I. Roadmap and Summary
II. Evolution of Exchange Rate Arrangements in Latin America
III. A Common Currency for Latin America?
A. Real Aspects of Optimal Currency Areas
B. Financial Considerations
C. Political and Institutional Considerations
IV. Unilateral Dollarization
A. Achieving Monetary Credibility
B. Spontaneous Dollarization
C. Trade Integration as an Advantage
V. Floating Exchange Rates
A. Some Anecdotes
B. The Taylor Rule as a Benchmark for Monetary Policy
C. The Taylor Rule in the Tropics
D. Response to Important Shocks
E. Inflation Pass-Through
VI. Conclusions
References
Tables
1. Exchange Rate Regimes and Monetary Targets: South America and Central America, 1985–2001
2. Latin American Countries: Trade Shares, 2000
3. Correlation Matrix of Spread Residuals
4. Correlation Matrix of Forward Premiums, 2000–2002
5. Correlation Matrix of the Estimated Probabilities of an Exchange Rate Crisis, According to the DCSD Model 1985–2001
6. Latin America: Legal Central Bank Independence and Inflation
7. Latin America: Foreign Currency Deposits as a Share of Total Deposits, 1992–2000
8. Taylor Equations for Various Countries
Figures
1. Exchange Rate Regimes, 1990–2001
2. Latin America: Private Deposits Abroad, 1983–2001
3a. Argentina and Mexico: Inflation, Output and the Real Exchange Rate
3b. Chile and Peru: Inflation, Output and the Real Exchange Rate
3c. Hong Kong SAR and Singapore: Inflation, Output and the Real Exchange Rate
4. Inflation Pass-through in Mexico