Strict Dollarization and Economic Performance: An Empirical Investigation

Sebastian Edwards and I. Igal Magendzo

Journal of Money, Credit and Banking, 2006, vol. 38, issue 1, 269-282

Abstract: In this paper we analyze the macroeconomic record of "strictly dollarized" economies. In particular, we investigate whether dollarized countries have historically exhibited faster growth and lower volatility than countries with a domestic currency. We analyze this issue by using a treatment regression analysis that estimates jointly the probability of being a dollarized country, and outcome equations. Our analysis indicates that the probability of being a dollarized country depends on regional, geographical, political, and structural variables. Our results also suggest that GDP per capita growth has not been statistically different in dollarized and in non-dollarized countries. We also find that volatility has been significantly higher in dollarized than in non-dollarized economies. These results are robust to the estimation technique, and to the sample used.

Date: 2006
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Working Paper: Strict Dollarization and Economic Performance: An Empirical Investigation (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:38:y:2006:i:1:p:269-282

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