The Central American–Dominican Republic FreeTrade Agreement (CAFTA-DR) with the United States, combined with increasing integration

among the Central American countries, provides an opportunity to reflect on the long-run options for ex-change rate regimes in Central America.1 Although the macroeconomic conditions of the Central Ameri-can countries present similarities and have improved significantly in recent years, their exchange rate regimes cover the whole spectrum: floating regimes in the Dominican Republic and Guatemala, and crawling pegs in Costa Rica, Honduras, and Nicaragua, and full dollarization in the cases o