Re: dollarization

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

Would adopting the euro classified as dollarization by the authors?

By the example of the euro, adoption requires certain domestic macro economic
requirements such as interest rates and inflation rates, budget deficits,
etc.

Dollarization with dollars is independent of those requirements, without
which a stable currency would be a fantasy wish. The problem with
dollarization is that the adopting economy does not enjoy the privilege of US
exceptuionalism of dollar hegemony.


"J. Barkley Rosser, Jr." wrote:

> Juan,
>       The comparison is relative to other countries.
> One of the major technical aspects of the paper is
> a new way to figure out appropriate sets of countries
> that should be compared with the "dollarized"
> countries.  Also, they use the term "dollarization"
> to mean the replacement of a local currency by
> any major outside national currency.  So, there
> are countries using a variety of other national
> currencies that are in the "dollarized" set, not
> just those using dollars per se.
>      BTW, apparently both El Salvador and Guatemala
> have dollarized in the last year.  Did not see that in
> the papers.  Neither they nor Ecuador are in the data
> set because of having been dollarized so recently.
> Barkley Rosser
> ----- Original Message -----
> From: "Juan Jose Barrios" <jota@xxxxxxxxxxxxxx>
> To: <pkt@xxxxxxxxxxxxxxxx>
> Sent: Wednesday, January 09, 2002 12:51 AM
> Subject: Re: dollarization
>
> > Before I read the article, do they compare inflation and growth "before
> > and after" dollarization? or they compare inflation and growth relative
> > to other countries? thanks
> >
> > "J. Barkley Rosser, Jr." wrote:
> >
> > >       There is an interesting new paper
> > > about dollarization available from NBER.
> > > It is "Dollarization, Inflation and Growth,"
> > > by Sebastian Edwards adn I. Igal Magendo,
> > > NBER Working Paper 8671, Dec. 2001,
> > > http://www.nber.org/papers/w8671.
> > >        The results are somewhat surprising,
> > > given Edwards' genearl conservatism and
> > > orthodoxy.  The findings are that dollarization
> > > have not been associated with faster growth,
> > > indeed quite the opposite.  The orthodox
> > > finding that it is associated with lower inflation
> > > seems to hold, however.  There seems to be
> > > no particular relation with volatility.
> > > Barkley Rosser
> >
> >