| Sumario: | Full dollarization is attracting growing attention in both policy-making and academic arenas, especially in the Western hemisphere. Full dollarization is a complete monetary union with a foreign country from which a country “imports” a currency by adopting the foreign currency as full legal tender and placing its own currency, if any, in a subsidiary role. Despite unofficial use of foreign currency in numerous countries, only a few independent nations and dependencies have officially adopted a foreign currency as legal tender. Full dollarization is not more widespread because of the political symbolism of a national currency, historical patterns of use of domestic and foreign currency, and economic considerations, such as the perceived expense of dollarization. However, with more countries in the Western hemisphere considering using the U.S. dollar as their own major currency, the question arises as to how dollarized countries will respond to a U.S. monetary policy over which they have no control. A discussion on fully dollarized economies and the effects of dollarization is provided.
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