This book investigates the relative merits of different exchange rate regimes along several dimensions, especially with respect to reductions in inflation, the promotion of financial deepening and the avoidance of stagnation in output. The main findings are that a common currency -combined with no legal restrictions on exchange, helps the financial periphery to overcome liquidity problems and the constraints they imply on output. Moreover, since an exchange rate regime is defined by a particular choice and financing of monetary targets while volatility reflects the presence of endogenous...