Re: [A-List] [Fwd: IMF Snake Oil]

["James Daly" <james.irldaly@xxxxxxxxxxxx>]

This too -- James
----- Original Message -----
From: "Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>
To: "The A-List" <a-list@xxxxxxxxxxxxxxxxxxx>; "James Daly"
<james.irldaly@xxxxxxxxxxxx>
Sent: Saturday, February 18, 2006 7:05 PM
Subject: [A-List] [Fwd: IMF Snake Oil]


: James, tell me if this get through.
:
: -------- Original Message --------
: Subject: IMF Snake Oil
: Date: Sat, 18 Feb 2006 01:40:16 -0500
: From: Henry C.K. Liu <hliu@xxxxxxxxxxxxxx>
: To: The A-List <a-list@xxxxxxxxxxxxxxxxxxx>,
: TheNewForum@xxxxxxxxxxxxxxx, Sharefin <longwaves@xxxxxxxxxxxxx>
:
:
:
: An IMF Paper
:
: An Evaluation of Monetary Regime Options for Latin America
: by
: Andrew Berg
: Eduardo Borensztein
: Paolo Mauro
:
: Abstract
:
: Over the past decade, most Latin American countries have moved
toward
: either extreme of floating rates or dollarization, in line with
: worldwide trends. In this paper, we evaluate the wisdom of those
: decisions and the choice of monetary regime more generally. We first
: evaluate the desirability of adopting a common currency in the
region.
: We find that, under present circumstances, the costs of a common
: currency are likely to outweigh its benefits, as these countries do
not
: trade much with each other and, moreover, they face diverse economic
: shocks, their business cycles are not coordinated, and they are
affected
: by common shocks to sentiment in international financial markets
only to
: the same extent than the average pair of emerging markets. We next
: consider the unilateral dollarization option. For most Latin
American
: countries, this would be desirable only when there are strong links
to
: the US economy, the credibility of the monetary authorities is
: irreversibly lost, and there is a keen demand for dollar-denominated
: financial assets. Finally, we review the relatively short experience
of
: floating exchange regimes in Latin America and find that, despite
the
: external constraints, floating countries have retained sufficient
: flexibility to use monetary policy for domestic ends in response to
: important shocks. End of Abstract.
:
: Comment by Henry C.K. Liu:
:
: The reason why at present Latin American countries do not trade much
: with each other is in large part due to the absence of a common
: currency. Thus to present the lack of trade as a reason not to have
a
: common currency is a circular argument.  This is typical IMF
position to
: prevent any possible cahllenge to the dollar.
:
: As for dollarization, the disastrous experience of Argentina says it
: all.  What Latin America needs is currency control which has been
: successfully used by Malaysia during the Asian Financial Crisis of
1997.
:
: Henry C.K. Liu
:
:
:
:
: