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Essay Details:
Essay text:
Many economists now recommend that countries give up the idea of intermediate exchange rate models and adopt corner solutions such as free floating exchange rates, and currency boards or dollarization. The latter has become highly popular among emerging economies, principally in Latin America, despite its controversiality.
In the first section of my essay I am going to talk about some of the theory behind the exchange rate and from there decide what is the best choice for EM economies. In the second part, I will analyze some empirical evidence related to currency board and dollarization. In the last and third section of this paper I try to answer the question when is dollarization necessary despite its uncertainty?
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