Rules

THE WESTERN HEMISPHERE DOLLAR BLOC GAME: RULES OF THE
1980S AND 1990S*

KENNETH P. JAMESON

DEPARTMENT OF ECONOMICS

UNIVERSITY OF UTAH

JEL Classification : F4

Keywords : monetary order, rules, dollarization, Western Hemisphere, Latin America

Abstract : The last twenty years in Latin America have shown the centrality of exchange rate regimes to macro economic performance and to economic stability. The paper suggests that the exchange rate regime of a Latin American country is not a simple choice, made by an independent policy-making national government. Rather, the range of options is limited by the rules of the dollar bloc and the imperative to respect those rules. After examining the historical evolution of Latin America's insertion into monetary orders in the 20 th century, the paper specifies the rules of this dollar bloc during the 1980s and 1990s, building on McKinnon's work. The paper concludes by suggesting how the order is likely to evolve in coming years.

1. Introduction

2. Focusing the Issue

3. Latin America, the World Monetary Order, the Twentieth Century

4. Rules of the Dollar Bloc: 1980s vs. 1990s

5. How Will the Order Evolve?

6. Conclusions