The Pros and Cons of Full Dollarization

Eduardo Borensztein and Andrew Berg ()

No 2000/050, IMF Working Papers from International Monetary Fund

Abstract: We analyze the costs and benefits of full dollarization compared to its closest alternative, a currency board, quantifying for Argentina where possible. Potential advantages include lower borrowing costs and deeper integration into world markets. One cost is the transfer of seigniorage to the United States. The country may also lose the “exit option” to devalue in the face of major shocks. Similarly, even a country with a currency board may lose some ability to act as lender of last resort to the banking system. We review how various country characteristics influence the balance of arguments.

Keywords: WP; currency; dollar; unit of account; Dollarization; Exchange Rate Regimes; Currency Crises; Monetary Union; U.S. dollar; currency risk; crisis risk; dollar-denominated bond; devaluation risk; Currencies; Currency boards; Global (search for similar items in EconPapers)
Pages: 32
Date: 2000-03-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (105)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=3486 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2000/050

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().