Dollarization and Trade

Michael Klein

No 8879, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Dollarization has been suggested as a policy that might, among other goals, promote trade between a country adopting the dollar and the United States. Evidence supporting this conjecture could be drawn from a recent series of papers by Rose and co-authors who show that a currency union increases bilateral trade among its members, and that this effect is both large and statistically significant. In this paper we show that this result is not robust if we consider bilateral United States trade (even though the United States accounts for 60 percent of all observations of currency unions between industrial and non-industrial countries), nor if we consider bilateral trade of countries that have adopted the United States dollar, like Panama. Furthermore, the effect of dollarization on trade with the United States is not statistically distinct from the effect of a fixed dollar exchange rate on trade with the United States.

JEL-codes: F15 F33 (search for similar items in EconPapers)
Date: 2002-04
New Economics Papers: this item is included in nep-ifn and nep-lam
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Citations: View citations in EconPapers (31)

Published as Klein, Michael W. "Dollarization And Trade," Journal of International Money and Finance, 2005, v24(6,Oct), 935-943.

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