Dollarization Is No Silver Bullet for Latin America’s Inflation Woes
Recent proposals in Argentina and elsewhere tout a simple solution for a complex problem.
BUENOS AIRES - In April 2002, four months after the collapse of the currency’s peg to the dollar, Argentina’s inflation reached 10% per month. The economic debate saw a range of proposals—from turning the domestic banking system into an offshore money market (virtually eliminating domestic credit) to giving up Argentine financial and economic sovereignty for a few years. But none was more popular than official dollarization. By the end of the year, thanks in part to a mix of monetary and fiscal policy (as well as an external debt restructuring and a local debt currency conversion),...
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