Argentina fascinates exchange-rate mavens. Its currency, the peso, is fastened to the dollar in an arrangement that provides the strongest fix you can imagine short of outright dollarisation. The country has a currency board, which in effect promises, if need be, to swap dollars for pesos at the stated parity without limit. In the end, in other words, the government is willing not merely to tolerate but to facilitate the dollarisation of the economy, should it come to that. The reward for this stark clarity is, or ought to be, monetary stability: zero expectations of devaluation and, therefore, lower interest rates than would otherwise prevail.
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