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  • Author: Ralph Setzer x
  • Political Economics, other x
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Abstract

The collapse of the Argentinean Currency Board revived the debate about the optimal exchange rate regime for Argentina. Given its large exposure to nervous international investors, Argentina is a strong candidate for dollarization, which could provide lower inflation and higher financial integration with the United States. However, Argentina’s poor qualifications for a fixed exchange rate under the traditional optimum currency area criteria and the absence of adequate labor market and fiscal policy structures indicate that dollarization would suffer from the same problems as the Currency Board system. Thus, dollarization, in advance of other fundamental reforms seems a risky strategy.

Abstract

The official view of the European Commission for the Central and Eastern European Countries on their way to the euro is: first join the EU, then converge to the Maastricht criteria, then join the ECB. However, some CEES still aim at fixing their currencies to the euro. Why does the ECB oppose so strongly a „euroization“ of Central and Eastern European countries which are not members of European Monetary Union? What arguments can be made in favour of this strategy from the perspective of the affected CEECs? Is the unilateral „euroization“ also an alternative exchange rate system for bigger CEECs? This article gives tentative answers to these current and pressing questions.