Definition Definition


Dollarization is the replacement of a foreign currency with U.S. currency with U.S. dollars. This process is a step beyond a currency board because it forces the local currency to be replaced by the U.S. dollar. Although dollarization and a currency board does not replace the local currency with dollars . The decision to use U.S. dollars as the local currency cannot be easily reversed because the country no longer has a local currency.

One attraction of dollarization is that sound monetary and exchange-rate policies no longer depend on the intelligence and discipline of domestic policymakers. Their monetary policy becomes essentially the one followed by the U.S. , and the exchange rate is fixed forever.

Dollarization is the adoption of a sound currency, like the U.S. dollar, as a country’s money.

Share it: CITE

Related Definitions