About the product
Behind the discussion on optimal exchange-rate regimes lies the need to achieve external and internal equilibrium, and thus create an appropriate macroeconomic climate for sustained growth and development in Latin America and the Caribbean. Subregional cooperation offers both an intermediate option and a more coherent reference for the exchange-rate regimes in Latin America and the Caribbean. It provides the missing link for a concrete institutional building process on which macroeconomic sustainability could be founded. This paper presents a cooperative alternative to the national corner solutions of full dollarization or pure free floating. The solution is to create a set of incentives operating in a strong and institutionalized system of checks and balances at the regional level. This cooperative arrangement would bind national policy-making to a greater goal of regional macroeconomic coordination, and avoid that circumstantial problems may affect the long-term goal of good fiscal and monetary management.