ABSTRACT
Technical discussions of stabilization alternatives for Brazil have recently focused on the utilization of the exchange-rate as a nominal anchor and measures that involve a degree of dollarization of the economy. The latter would imply official sanction for the increasing substitution of foreign for national currency, a kind of decision that the experience of several Latin American countries has shown to be extremely difficult to reverse. Moreover, exchange-rate based stabilizations have often unleashed balance of payments crises. This paper reviews Argentina’s recent stabilization program and some of the lessons it may hold for Brazil. It argues that the Argentinian approach, as well as some of its variations, cannot be applied successfully in Brazil.
KEYWORDS:
Dollarization; inflation; stabilization