Dollarization as an effective commitment device: the case of Argentina
One of the main reasons to dollarize is to eliminate high, persistent, and volatile inflation. However, to be effective, dollarization must generate sufficient credibility, which in turn depends critically on whether its expected probability of reversal is low. In other words, whether it is an effective commitment device (ECD). Argentina once again faces high, persistent, and volatile inflation. With a looming presidential election politicians and academics are evaluating several options to stabilize prices and put the economy on a path of sustained growth.