Sir, Benn Steil makes the blanket recommendation for all emerging-market economies intent on safely globalising that their best option is to replace their domestic currencies with internationally accepted ones such as the US dollar or the euro ("The developing world should abandon parochial currencies", January 17). In so doing, he leaves one wondering where he was during the 2001 Argentine crisis.

Did not Argentina effectively abandon its domestic currency under its 1991 convertibility plan when it "immutably" pegged its currency to the US dollar at a 1:1 exchange rate? And did not that whole experiment of giving up one's domestic currency end in tears? After all, despite its rigid currency peg, Argentina experienced the largest sovereign debt default in history, while its economy sank into a deep depression comparable to the one it endured in the 1930s.

Argentina's sad experience with a rigid dollar peg should have taught us that abandoning one's currency in favour of an internationally accepted one is hardly a panacea. This is especially the case when the country abandoning its currency does not constitute an optimum currency area with the country to whose currency it is being pegged. It is all the more so the case when the pegging country does not have the political will to undertake those painful reforms required to make it more of an optimum currency area.

Against the backdrop of Argentina's experience with a rigid currency peg, one has to wonder whether countries such as Brazil and Mexico do not have a better approach to the challenges of today's increasingly globalised economy. By granting their central banks monetary policy independence and by retaining exchange-rate flexibility, they are able to deliver low inflation rates while retaining the policy flexibility to respond to external shocks.

Desmond Lachman is a resident fellow at AEI.