Can dollarization mitigate the macroeconomic cost of populism? Lessons from Latin America
The dollarization debate can be summarized as a trade-off between credibility and flexibility. Argentina is again at its center. Its traumatic exit from a currency board regime in January 2002 convinced many academics that flexibility was more important than credibility. However, its experience since then shows that flexibility in the hands of populist governments can lead to disastrous results.