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Official dollarisation/euroisation - motives, features and policy implications of current cases

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Author Info
Adalbert Winkler () (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
Francesco Mazzaferro () (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
Carolin Nerlich () (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
Christian Thimann () (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)

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Abstract

Official and unilateral dollarisation/euroisation has become a common policy advice for emerging market economies. Against this background, the paper provides a comprehensive review of all the main cases of dollarisation/euroisation, analysing motives, features and policy implications of this exchange rate regime. The main results are that policies fostering integration with the anchor country, in particular fiscal transfers, tourism and offshore finance, have been crucial in supporting the exchange rate regime. To this end, most dollarised/euroised countries have exploited advantages that are largely prior to the choice of exchange rate regime, namely their small size, geographic proximity to the anchor country, and politically dependent status. Thus, recommending dollarisation/euroisation irrespective of countries’ ex ante degree of integration with the potential anchor country seems to bear considerable risks, as dollarisation/euroisation does not seem to be a straightforward substitute for integration.

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Paper provided by European Central Bank in its series Occasional Paper Series with number 11.

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Length: 61 pages
Date of creation: Feb 2004
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Handle: RePEc:ecb:ecbops:20040011

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  1. Caprio, Gerard & Honohan, Patrick, 2001. "Finance for Growth: Policy Choices in a Volatile World," MPRA Paper 9929, University Library of Munich, Germany. [Downloadable!]
  2. Lawrence H. Summers, 2000. "International Financial Crises: Causes, Prevention, and Cures," American Economic Review, American Economic Association, vol. 90(2), pages 1-16, May. [Downloadable!] (restricted)
  3. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR, CES, MSH, vol. 15(30), pages 7-46, 04. [Downloadable!] (restricted)
  4. Andrew K. Rose & Charles Engel, 2000. "Currency Unions and International Integration," NBER Working Papers 7872, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Maria Gabriella Briotti, 2005. "Economic reactions to public finance consolidation - a survey of the literature," Occasional Paper Series 38, European Central Bank. [Downloadable!]
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  6. Heiko Schmiedel & Andreas Schönenberger, 2005. "Integration of securities market infrastructures in the euro area," Occasional Paper Series 33, European Central Bank. [Downloadable!]
  7. Andreas Hauskrecht & Nguyen Thanh Hai, 2004. "Dollarization in Viet Nam," Working Papers 2004-25, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
  8. Henrik Enderlein & Johannes Lindner & Oscar Calvo-Gonzalez & Raymond Ritter, 2005. "The EU budget – how much scope for institutional reform?," Occasional Paper Series 27, European Central Bank. [Downloadable!]
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  10. Adalbert Winkler & Roland Beck, 2006. "Macroeconomic and financial stability challenges for acceding and candidate countries," Occasional Paper Series 48, European Central Bank. [Downloadable!]
  11. Neven T. Valev, 2005. "From a currency board to the euro: Public attitudes toward unilateral euroization in Bulgaria," William Davidson Institute Working Papers Series wp736, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  12. Reiner Martin & Moreno Roma & Isabel Vansteenkiste, 2005. "Regulatory reforms in selected EU network industries," Occasional Paper Series 28, European Central Bank. [Downloadable!]
  13. Neven Valev, 2004. "From a Currency Board to the Euro: Public Attitudes toward Unilateral Euroization in Bulgaria," International Studies Program Working Paper Series, at AYSPS, GSU paper0423, International Studies Program, Andrew Young School of Policy Studies, Georgia State University. [Downloadable!]
  14. Lieven Baele & Annalisa Ferrando & Peter Hördahl & Elizaveta Krylova & Cyril Monnet, 2004. "Measuring financial integration in the euro area," Occasional Paper Series 14, European Central Bank. [Downloadable!]
  15. Guido Wolswijk & Jakob de Haan, 2005. "Government debt management in the euro area - recent theoretical developments and changes in practices," Occasional Paper Series 25, European Central Bank. [Downloadable!]
  16. Filippo Altissimo & Evaggelia Georgiou & Teresa Sastre & Maria Teresa Valderrama & Gabriel Sterne & Marc Stocker & Mark Weth & Karl Whelan & Alpo Willman, 2005. "Wealth and asset price effects on economic activity," Occasional Paper Series 29, European Central Bank. [Downloadable!]
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