ABSTRACT
This chapter discusses changes essentially from microeconomics to macroeconomics. Through much of its history, the countries of Latin America maintained fixed exchange rates. In the twenty-first century, the idea of a fixed exchange rate seems peculiar. Maintaining a fixed exchange rate is difficult for a country that is an exporter of commodities. When commodity prices are high, the government will need to buy up the excess foreign exchange to keep the currency from appreciating. The chapter presents the management of a fixed exchange rate by efficiently managing the level of reserves of foreign exchange. The most rigorous form of exchange controls gives the government a monopoly on dealing in foreign exchange. In this case, any holder of foreign exchange is obliged to sell it to the government at the official exchange rate. The information refers to exchange controls on the current account. Fortunately, such controls are a part of economic history.
