Abstract
The choice of exchange rate regimes has been a subject of debate for a long time. Across the globe countries have experimented with fixed, floating, and a wide variety of pegged exchange rate regimes. The vast empirical evidence on this matter appears to show that there is no single recipe to suit everyone. Hence it is no surprise that the rise of dollarisation has generated so much controversy. The book Dollarization: Debates and Policy Alternatives edited by Eduardo Levy Yeyati and Federico Sturzennegger, is a welcome attempt to organise our understanding of the topic. It consists of a collection of papers that blends analytical, empirical and institutional analyses in tackling this important policy issue. Levy Yeyati and Sturzennegger divide the book into eight Chapters, starting with a useful roadmap in Chapter 1. Chapter 2, by Roberto Chang and Andrés Velasco, provides an analytical framework to elucidate the basic mechanics of dollarisation. Pablo Andrés Neumeyer and Juan Pablo Nicolini engage one of the most debated issues in the context of dollarisation, i.e. the link between sovereign default and devaluation risk, in Chapter 3. Christian Broda and Eduardo Levy Yeyati examine a similarly critical topic, the implications of dollarisation for the central bank’s lender of last resort function, in Chapter 4.
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