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Dollarization and economic performance: What do we really know?

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Author Info
Sebastian Edwards (University of California, Los Angeles and National Bureau of Economic Research, USA)
I. Igal Magendzo (Central Bank of Chile, Chile)

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Abstract

In this paper we analyse the macroeconomic record of dollarized economies. In particular, we investigate whether, as its supporters claim, dollarization is associated with lower inflation and faster growth. We analyse this issue by using a matching estimator technique developed in the training evaluation literature. Our findings suggest that inflation has been significantly lower in dollarized nations than in non-dollarized ones. We also find that dollarized nations have had a lower rate of economic growth than non-dollarized ones. Finally, we find that macroeconomic volatility is not significantly different across dollarized and non-dollarized economies. We conjecture that the lower rate of economic growth in dollarized countries is due, at least in part, to these countries' difficulties in accommodating external disturbances, such as major terms of trade and capital flows shocks. Copyright © 2003 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/ijfe.217
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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.

Volume (Year): 8 (2003)
Issue (Month): 4 ()
Pages: 351-363
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Handle: RePEc:ijf:ijfiec:v:8:y:2003:i:4:p:351-363

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  4. Ilan Goldfajn & Gino Olivares, 2000. "Is adopting Full Dollarization the solution? Looking at the evidence," Textos para discussão 416, Department of Economics PUC-Rio (Brazil). [Downloadable!]
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. John Murray & James Powell, 2002. "Dollarization in Canada: The Buck Stops There," Technical Reports 90, Bank of Canada. [Downloadable!]
  2. Andreas Billmeier & Tommaso Nannicini, 2007. "Trade Openness and Growth: Pursuing Empirical Glasnost," IMF Working Papers 07/156, International Monetary Fund. [Downloadable!]
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