One distinguishable characteristic of emerging market economies is that they are not financially robust. These economies are incapable of smoothing out large external shocks, as sudden capital outflows imply large and abrupt swings in the real exchange rate. Using a small open-economy model,...

In the last years four Latin American countries (Chile, Colombia, Mexico and Peru) have switched to inflation targeting as the main mechanism to guide their monetary policies. In this paper we address some of the basic questions regarding its implementation: (i) which inflation measure should...

One distinguishable characteristic of emerging market economies is that they are not financially robust. These economies are incapable of smoothing out large external shocks, as sudden capital outflows imply large and abrupt swings in the real exchange rate. Using a small open-economy model,...

One distinguishable characteristic of emerging economies is that they are not financially robust. These economies are incapable to smooth out large external shocks as sudden capital outflows or terms of trade shocks imply large and abrupt swings in the real exchange rate. This could be very...

The previous literature on dollarization processes has two basic problems. First is the poor empirical methods of measurement, and second is the lack of a clear definition of the phenomenon under study. Several methodological problems have not been successfully addressed. Foreign currency...