Cato White Papers and Miscellaneous Reports

February 1, 1999

A Dollarization Blueprint for Argentina

by Steve H. Hanke and Kurt Schuler

Steve H. Hanke is Professor of Applied Economics at the Johns Hopkins University and an Adjunct Scholar of the Cato Institute. Kurt Schuler is a monetary consultant based in Arlington, Virginia. This study first appeared in "Friedberg's Commodity and Currency Comments Experts' Report," February 1, 1999.

President Carlos Menem of Argentina has advocated the dollarization of his country's economy in response to currency instability in Brazil and elsewhere. Replacing the peso with the dollar would ensure that the currency Argentina uses is stable and convertible, and it would lead to lower interest rates and higher growth rates.

Argentina's currency is currently fixed to the dollar under its currency board system and convertible on demand. But because the currency board is not orthodox, dollarization of the economy is preferable to continued use of the peso. It would be easy to dollarize the Argentine economy because dollars are already legal there and are widely used.

Professor Steve H. Hanke, professor of applied economics at the Johns Hopkins University and an adjunct scholar at the Cato Institute, met with President Menem in Buenos Aires on February 10 to discuss dollarization and presented him with "A Dollarization Blueprint for the Argentine Economy". Menem subsequently presented the document formally to his cabinet.

Text of A Dollarization Blueprint for Argentina (PDF)

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