In April 1991, Argentina established a currency board to cure its chronic inflation. Because the currency board issues only pesos for dollars at a fixed rate of one-for-one, dollar reserves back Argentina’s monetary base. The currency board cannot undertake open-market operations or make loans. Tying the peso to the dollar protects the peso’s purchasing power by linking Argentina’s monetary policy to the U.S. Since 1994, Argentina has maintained an inflation rate similar to that of the U.S.
Suggested citation: "Dollarizing Argentina," Federal Reserve Bank of Cleveland, Economic Trends, no. 99-03, pp. 19, 03.01.1999.