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Implementing official Dollarization

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  • Ã…ke Lönnberg
  • Luis Ignacio Jácome

Abstract

This paper identifies key aspects that countries willing to officially dollarize must necessarily address. Based on country experiences, it discusses the critical institutional bases that are necessary to unilaterally introduce a new legal tender, describes the relevant operational issues to smooth the transition toward the use of the new currency, and identifies key structural reforms that are necessary to favor the sustainability over time of this monetary regime. The paper is aimed at providing preliminary guidance to policy makers and practitioners adopting official dollarization. The paper does not take a position on how appropriate this monetary arrangement is. Experiences from adopting dollarization in Ecuador, El Salvador, Kosovo, Montenegro, and Timor-Leste are illustrated briefly.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/106.

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Length: 31
Date of creation: 01 Apr 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/106

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Related research

Keywords: Dollarization; Bank reforms; Bank supervision; Central bank legislation; Central bank role; Fiscal reforms; Governance; Labor market reforms; Trade policy; central bank; inflation; domestic currency; monetary regime; central banks; currency board; monetary arrangement; monetary fund; reserve requirements; national bank; public finances; public debt; private financial institutions; monetary union; monetary policy; currency mismatches; external shocks; monetary integration; open market operations; government securities; currency risk; liquidity management; reserve requirement; treasury operations; debt default; government deficits; monetary unions; monetary policy framework; monetary system; monetary reform; monetary agreement; external financing; foreign loans;

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References

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  1. Eichengreen, Barry, 2002. "When to Dollarize," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 34(1), pages 1-24, February.
  2. Charles Enoch & Tomás J. T. Baliño, 1997. "Currency Board Arrangements," IMF Occasional Papers 151, International Monetary Fund.
  3. Salvatore, Dominick, 2001. "Which countries in the Americas should dollarize?," Journal of Policy Modeling, Elsevier, Elsevier, vol. 23(3), pages 347-355, April.
  4. Guillermo A. Calvo, 2002. "On dollarization," The Economics of Transition, The European Bank for Reconstruction and Development, The European Bank for Reconstruction and Development, vol. 10(2), pages 393-403, July.
  5. Corbo, Vittorio, 2001. "Is it time for a common currency for the Americas?," Journal of Policy Modeling, Elsevier, Elsevier, vol. 23(3), pages 241-248, April.
  6. Eduardo Levy Yeyati & Alain Ize & Miguel A. Kiguel, 2005. "Managing Systemic Liquidity Risk in Financially Dollarized Economies," IMF Working Papers 05/188, International Monetary Fund.
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Cited by:
  1. Nannette Lindenberg & Frank Westermann, 2012. "How strong is the case for dollarization in Central America? An empirical analysis of business cycles, credit market imperfections and the exchange rate," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 17(2), pages 147-166, 04.

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