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Implementing Official Dollarization

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  • Åke 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.

Suggested Citation

  • Åke Lönnberg & Luis Ignacio Jácome, 2010. "Implementing Official Dollarization," IMF Working Papers 10/106, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:10/106
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=23800
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    References listed on IDEAS

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    1. 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.
    2. Salvatore, Dominick, 2001. "Which countries in the Americas should dollarize?," Journal of Policy Modeling, Elsevier, vol. 23(3), pages 347-355, April.
    3. Corbo, Vittorio, 2001. "Is it time for a common currency for the Americas?," Journal of Policy Modeling, Elsevier, vol. 23(3), pages 241-248, April.
    4. Charles Enoch & Tomás J. T. Baliño, 1997. "Currency Board Arrangements; Issues and Experiences," IMF Occasional Papers 151, International Monetary Fund.
    5. Guillermo A. Calvo, 2002. "On dollarization," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 10(2), pages 393-403, July.
    6. Eichengreen, Barry, 2002. "When to Dollarize," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(1), pages 1-24, February.
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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, April.

    More about this item

    Keywords

    Dollarization; Central bank; exchange rate; inflation; domestic currency; monetary regime; central banks;

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