Abstract

In the 1990s, Russia and Argentina both tied their currencies to the dollar to combat inflation. They later devalued under pressure, but only after an extremely costly delay, and only after an explosive spread of monetary surrogates substituting for official currency. This article explains these puzzling developments using an institutional-sociological approach to money, which relates exchange-rate preferences to financial context rather than sectoral position, as is common. It proposes a “lock-in” mechanism explaining delayed devaluation in both cases, as well as Argentina’s greater delay, and explores the linkages between exchange-rate policy and the origins of monetary surrogates.