Strict Dollarization and Economic Performace Revisited

Johnny Thornton and Chrysovalantis Vasilakis
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Johnny Thornton: University of East Anglia-US department of the Treasury

No 322, Working Papers from Red Nacional de Investigadores en Economía (RedNIE)

Abstract: We revisit the historical record of the economic performance of strictly dollarizedeconomies relative to that economies of non-dollarized economies as previously examined byEdwards (2001) and Edwards and Magendzo (2003, 2006). We extend their work to takeadvantage of the experience of more recently dollarized economies, employ a larger countrysample and a longer sample period, use panel as opposed to cross-section data, and employ avariety of econometric techniques, including to deal with potential endogeneity problems. Ourresults suggest that overall countries that adopted dollarization experienced higher average GDPgrowth rates and lower inflation rates and inflation volatility than countries that did not adoptdollarization. Moreover, even GDP growth appears to have been less volatile in dollarizedcountries in recent years.

Keywords: Strict dollarization; GDP growth; inflation; volatility (search for similar items in EconPapers)
JEL-codes: E30 E31 F43 O11 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2024-05
New Economics Papers: this item is included in nep-fdg and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:aoz:wpaper:322

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