After faithfully maintaining a fixed exchange rate and fully convertible currency for almost a decade Argentina still pays higher interest rates on peso denominated debt than on US dollar denominated debt. The interest rate spread is the price of keeping the option to devalue alive. Argentina...

This is the first paper to examine international monetary surprise spillovers and to estimate the response of security prices to monetary and nonmonetary surprises. Monetary surprises have a slope effect on the domestic yield curve--short maturity yields adjust much more than longer maturity...