Re: Dollarization -- Moore's argument

[Bruce McFarling <ecbm@xxxxxxxxxxxxxxxxxxx>]

On Mon, 14 May 2001 19:39:47 -0400,
Basil Moore <bjm@xxxxxxxxxxxxxxxx> wrote:

>I am not (yet) persuaded that dollarization is desirable, for all
>countries, or for any single country. My point is simply that it removes
>the necessity of pursuing demand restriction to reduce a current account
>imbalance. So long as an economic unit or a country has, or simply is
>believed to have, good future prospects, so that others are willing to sell
>it things on credit.i.e. provide it with loans, it can continue to run
>deficits indefinitely, and is not constrained because it is running out of
>foreign exchange reserves.

I'm trying to work out how this is different from the present.
Can't a country that has other's willing to sell it things
on credit continue to run current account deficits indefinitely,
balanced by capital account surpluses (the credit) without
running out of foreign exchange reserves?

It seems that dollarisation solves a problem under circumstances
in which the problem does not exist.


Virtually,

Bruce McFarling, Shortland, NSW
ecbm@xxxxxxxxxxxxxxxxxxx