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Dedollarization in Liberia-Lessons From Cross-Country Experience

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  • Jeta Menkulasi
  • Lodewyk Erasmus
  • Jules Leichter
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    Abstract

    Liberia''s experience with a dual currency regime, with the U.S. dollar enjoying legal tender status, dates to its founding as a sovereign country in 1847. Following the end of the most recent episode of civil war in late-2003, the new government has expressed interest in strengthening the role of the Liberian dollar. Liberia, however, is heavily dollarized, with the U.S. dollar estimated to account for about 90 percent of money supply. Cross-country experience suggests that dollarization does not preclude monetary policy from achieving its primary objective of price stability, and that successful and lasting dedollarization may be difficult to achieve.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/37.

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    Length: 23
    Date of creation: 01 Mar 2009
    Date of revision:
    Handle: RePEc:imf:imfwpa:09/37

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    Related research

    Keywords: Price stabilization; dollarization; foreign currency; inflation; monetary policy; money supply; foreign exchange; capital flight; inflation targeting; monetary base; financial stability; macroeconomic stability; economic instability; dollar value; real effective exchange rate; loss of confidence; price stability; high inflation; independent central bank; inflation rate; lower inflation; real variables; money growth; high interest rates; macroeconomic crises; real value;

    This paper has been announced in the following NEP Reports:

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    1. Plamen Yossifov, 2003. "Selective Credit Controls And The Money Supply Process In Transitional Economies: The Case Of Bulgaria," Macroeconomics 0302006, EconWPA.
    2. Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003. "Addicted to Dollars," CEMA Working Papers 594, China Economics and Management Academy, Central University of Finance and Economics.
    3. Eduardo Fernández-Arias, 2006. "Financial Dollarization and Dedollarization," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
    4. Adam Bennett & Eduardo Borensztein & Tomás J. T. Baliño, 1999. "Monetary Policy in Dollarized Economies," IMF Occasional Papers 171, International Monetary Fund.
    5. International Monetary Fund, 2003. "Economic Policy in a Highly Dollarized Economy," IMF Occasional Papers 219, International Monetary Fund.
    6. Liliana Schumacher & Jiro Honda, 2006. "Adopting Full Dollarization in Postconflict Economies," IMF Working Papers 06/82, International Monetary Fund.
    7. Carlos O. Arteta, 2003. "Are financially dollarized countries more prone to costly crises?," International Finance Discussion Papers 763, Board of Governors of the Federal Reserve System (U.S.).
    8. Arturo Galindo & Leonardo Leiderman, 2005. "Living with Dollarization and the Route to Dedollarization," Research Department Publications 4397, Inter-American Development Bank, Research Department.
    9. Zeljko Bogetic, 2005. "Official Dollarization: Current Experiences and Issues, Cato Journal, Vol. 20, No. 2 (Fall 2000), 179-213," International Finance 0510006, EconWPA.
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    Cited by:
    1. Sok Heng Lay & Makoto Kakinaka & Koji Kotani, 2010. "Exchange Rate Movements in a Dollarized Economy: The Case of Cambodia," Working Papers EMS_2010_18, Research Institute, International University of Japan.

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