Dollarised Economy Macroeconomics

Francois Boye
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Francois Boye: Independent Consultant

Brazilian Electronic Journal of Economics, 2004, vol. 6, issue 1

Abstract: Which kind of open economy macro-economics results from the adoption of dollarisation as an exchange rate and monetary regime? To answer this question, this paper revisits the famous Dornbusch model exposed in the 1976 JPE article on .Expectations and Exchange Rate Dynamics., a structuralist model and the Obstfeld-Rogoff redux model. Its findings are as follows: dollarisation can be an inflationary shock; dollarisation is no guarantee of a price or interest rate convergence between the dollarised economy and the USA; dollarisation does not change necessarily the long term GDP prospects of an economy; dollarisation does not make economic policy more capable of affecting the long term prospects of an economy; dollarisation is no guarantee of economic stability.

Keywords: Dollarisation; open economy macro-economics; economic policy; macro-economic stability (search for similar items in EconPapers)
JEL-codes: E1 E6 F4 (search for similar items in EconPapers)
Date: 2004
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