A Currency of One's Own? An Empirical Investigation on Dollarization and Independent Currency Unions

Sebastian Edwards () and Igal Magendzo

No 9514, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper we analyze whether common currency' countries that is, dollarized and independent currency union countries have outperformed countries that have a currency of their own. The paper is empirical and estimates jointly the probability of being a common currency country and outcome' equations for growth, volatility and inflation. We find that both type of common currency countries have lower inflation than countries with a domestic currency. Dollarized countries have lower growth and higher volatility than countries with a domestic currency. Currency unions, on the other hand, have higher growth and higher volatility than countries with a currency of their own.

JEL-codes: F3 F4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn, nep-lam and nep-rmg
Date: 2003-02
Note: IFM
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