Abstract: This chapter looks into the implementation of dollarization and flexible exchange rate regimes in Latin America. The current features of Latin American countries do no warrant the immediate implementation of a single currency. The severe constraints facing Latin American countries warrant the use of increased flexibility in exchange rates to deal with trade and financial shocks. Exchange rate flexibility should be complemented by the appropriate provision of liquidity and effective use of monetary instruments.

Keywords: Latin America, dollarization, flexible exchange rates,