Assessing FX Regimes In Central America

July 2008 | Economic Analysis

BMI View: Whether fixed or crawling, Central America's dollar pegs are feeling the pressures of deteriorating external conditions. In the absence of meaningful adjustment mechanisms, the authorities may have to grin and bare the strain of worsening current account balances and acute inflationary pressures in 2008 and 2009. However, with foreign reserve positions still relatively healthy, a dissolution of FX regimes remains an unlikely scenario.

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