Playing Monopoly with the Devil: Dollarization and Domestic Currencies in Developing Countries

Description

Why should a developing country surrender its power to create money by adopting an international currency as its own? This comprehensive book explores the currency problems that developing countries face and offers sound, practical advice for policy makers on how to deal with them. Manuel Hinds, who has extensive experience in real-world economic policy making, challenges the myths that surround domestic currencies and shows the clear rationality for dollarization or the use of a standard international currency. The book opens with an entertaining story of the Devil, who, through a series of common macroeconomic maneuvers, coaches the president of a mythical country into financial ruin. This ruler’s path is not unlike that taken in several real developing countries, to their detriment. Hinds goes on to introduce new ways of thinking about financial systems and monetary behavior in Third World countries. Council on Foreign Relations Contents Acknowledgments Prologue. Playing Monopoly with the Devil Introduction Part One. The Unfulfilled Promises of Local Currencies Chapter 1. The Standard of Value and the Reversed Liquidity Trap Chapter 2. The Unfulfilled Promises in the Financial System Chapter 3. The Unfulfilled Promises in Trade and Growth Chapter 4. The Costs of Stability Chapter 5. Missing Financial Globalization Part Two. The Reversed Liquidity Trap and Financial Crises Chapter 6. The Financial Risks of Monetary Regimes Chapter 7. The Currency Origins of Financial Crises Chapter 8. The Myth of the Lender of Last Resort Chapter 9. The Solution of Crises and the Aftermath Chapter 10. The Counterfactuals Part Three. The Optimal Currency Area and the Choice of Currency Chapter 11. The Conventional Optimal Currency Area Theory Chapter 12. Toward a Redefinition of an Optimal Currency Area Chapter 13. Conclusions Epilogue. Werner von Bankrupt on the Art of Buying Countries with a Buck-Fifty Notes Index