This paper identifies the institutional and operational requisites for transitions to floating exchange rate regimes. In particular, it explores key issues underlying the transition, including developing a deep and liquid foreign exchange market, formulating intervention policies consistent with...

In recent years, recommendations for countries to unilaterally dollarize/eurorize have become common, particularly when the countries lack economic credibility. After exploring the characteristics of dollarizing/eurorizing economies, we look at the merits and costs of unilateral eurorization for...

A key issue in creating a new currency union is setting the rates to convert national currencies into the new union currency. Planned unions in the Gulf region and Africa are seeking methods to set the conversion rates when their new currencies are created. We propose a forward-looking...

The analysis is structured around the standard taxonomy of transmission channels. A monetary tightening must limit banks' ability to supply loans by reducing bank reserves/bank credit. The direct interest rate channel is the strongest channel of the monetary policy transmission mechanism (MPTM),...

We assess monetary regime options for Latin American countries. The costs of a common currency are likely to outweigh its benefits, as those countries face diverse economic shocks, do not trade much with each other, and are affected by common international financial shocks only to the same...

This paper seeks to draw lessons from the IMF’s experience in handling financial crises around the globe over the past ten years that are relevant to the challenges faced by countries in Latin America, especially in the wake of the recent crisis in Argentina. Experience suggests that...

This paper assesses São Tomé and Príncipe's monetary and exchange rate arrangements in light of the country's monetary history and the relevant experience of comparable countries in Africa. The study highlights several structural characteristics of São Tomé and Príncipe including its very...