Dollarization: Debates and Policy Alternatives

Dollarization: Debates and Policy Alternatives

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MIT Press

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Dollarization: Debates and Policy Alternatives

With the persistent instability of international financial markets, emerging economies are exploring new ways to reduce exposure to capital flow volatility. Some analysts argue that financially open economies are best served by more flexible regimes, while others argue in favor of extreme exchange rate regimes that have a strong commitment to a fixed parity or dispense with an independent currency. The successful launch of the euro has made more realistic the prospect of replacing a national currency with a strong foreign one. Recent examples include the adoption of the US dollar by Ecuador and El Salvador.

The introduction of a foreign currency as sole legal tender, termed full (de jure) dollarization, has been the center of much political and academic debate. This book provides a comprehensive analysis of the issues from both theoretical and empirical perspectives. The topics discussed include the role of balance sheet effects, the linkage between currency risk and country risk, the impact of dollarization on trade, financial integration and credibility, the implications of dollarization for the lender of last resort, and the institutional and political economy aspects of dollarization.

Product Details

ISBN-13: 9780262122504
Publisher: MIT Press
Publication date: 12/15/2002
Edition description: New Edition
Pages: 351
Product dimensions: 7.00(w) x 9.00(h) x 1.00(d)
Age Range: 18 Years

Table of Contents

1Dollarization: A Primer1
2Dollarization: Analytical Issues53
3Using Balance Sheet Data to Identify Sovereign Default and Devaluation Risk77
4Dollarization and the Lender of Last Resort101
5Measuring Costs and Benefits of Dollarization: An Application to Central American and Caribbean Countries133
6Dollarization: The Link between Devaluation and Default Risk201
7Implementation Guidelines for Dollarization and Monetary Unions237
8The Political Economy of Dollarization: Domestic and International Factors305

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