Full Dollarization: The Pros and Cons

Economic Issues, December 20, 2000

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Full Dollarization: The Pros and Cons

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Bibliographic details

• Authors: Eduardo Borensztein, Andrew Berg
• Published: December 20, 2000
• Series: Economic Issues
• Volume: 2000
• Issue: 004
• Pages: 22
• DOI: https://doi.org/10.5089/9781557759931.051
• Stock No: EIIEA024
• ISBN: 9781557759931
• ISSN: 1020-5098

Overview

• Authors: Eduardo Borensztein, Andrew Berg
• Publication date: December 20, 2000
• Core question: Costs and benefits of full dollarization (adoption by one country of another country’s currency)
• Main comparison: Full dollarization versus the currency board option

Key findings: benefits

• Potential advantages include:
  • lower borrowing costs
  • deeper integration into world markets

Key findings: costs and risks

• Potential disadvantages include:
  • loss of the ability to devalue
  • dependence on the U.S.

Comparative analysis

• The analysis explicitly compares full dollarization with the currency board option, weighing trade-offs between:
  • relinquishing independent monetary policy (full dollarization) and
  • institutional arrangements that attempt to rigidly anchor a domestic currency (currency board)

Subject coverage and keywords

• Subject: Banking, Currencies, Currency boards, Dollarization, Exchange rates, Financial crises, Foreign exchange, Monetary policy, Money
• Keywords: Currencies, currency, Currency boards, currency risk, devaluation, dollar, Dollarization, EI, exchange arrangement, Exchange rates, foreign currency, Global, money base, unit of account