The Problem With Currency Boards in Argentina

Currency boards with fixed exchange rates like the one in Argentina hinder the central bank's ability to conduct monetary policy effectively. In the case of Argentina, a non-orthodox currency board led to a dual exchange rate system, sparking speculation and eventually causing a chaotic exit in 2001. Dollarization in countries like Panama, Ecuador, and El Salvador completely eliminates the central bank's control over monetary policy by adopting a foreign currency as the official currency, benefiting the people by preventing manipulation of the currency.