The Latin American Dollar Standard in the Post-Crisis Era

41 Pages Posted: 28 Mar 2007

See all articles by Reid W. Click

Reid W. Click

George Washington University - Department of International Business

Date Written: March 15, 2007

Abstract

This paper examines the extent to which there is currently a "dollar standard" in Latin America by empirically looking at the time series relationships between local currencies and the major global currencies using daily data over the period 2003-2006. The results indicate that three countries in the Andes - Ecuador (which is officially dollarized), Bolivia, and Peru - are on practically perfect dollar standards and might find additional financial integration fairly practicable. Four more countries - Guyana, Uruguay, Argentina, and Paraguay - are nearly on a dollar standard and might easily move closer to dollarization. Guyana, Uruguay, and Paraguay have economies substantially smaller than that of Ecuador, which has already officially dollarized, and might find similar full dollarization relatively easy. Argentina, although having abandoned its currency board mechanism, seems to be engineering (or at least allowing) a persistent, though imperfect, link to the dollar. Mexico and Colombia are on a partial dollar standard, but exhibit influence from other currencies as well (the yen and the pound for Mexico, and the yen and the euro for Colombia). Four additional currencies investigated - Chile, Brazil, Canada, and Venezuela - are further from a dollar standard but are certainly not completely independent of the dollar either.

Keywords: exchange rates, Latin America, dollarization, international monetary arrangements

JEL Classification: F31, F33

Suggested Citation

Click, Reid William, The Latin American Dollar Standard in the Post-Crisis Era (March 15, 2007). Available at SSRN: https://ssrn.com/abstract=972160 or http://dx.doi.org/10.2139/ssrn.972160

Reid William Click (Contact Author)

George Washington University - Department of International Business ( email )

2201 G Street NW Suite 401
Washington, DC 20052
United States
202-994-0656 (Phone)
202-994-7422 (Fax)

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