The Pros and Cons of Full Dollarization
We analyze the costs and benefits of full dollarization compared to its closest alternative, a currency board, quantifying for Argentina where possible. Potential advantages include lower borrowing costs and deeper integration into world markets. One cost is the transfer of seigniorage to the United States. The country may also lose the “exit option” to devalue in the face of major shocks. Similarly, even a country with a currency board may lose some ability to act as lender of last resort to the banking system. We review how various country characteristics influence the balance of arguments.
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- Graciela L. Kaminsky & Carmen M. Reinhart, 1996.
"The twin crises: the causes of banking and balance-of-payments problems,"
International Finance Discussion Papers
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- Reinhart, Carmen & Kaminsky, Graciela, 2000.
"Las crisis gemelas: las causas de los problemas bancarios y de balanza de pagos
[The twin crises: Te causes of banking and balance of payments problems]," MPRA Paper 13842, University Library of Munich, Germany.
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