Business, Legal & Accounting Glossary
Dollarization occurs when a country consciously adopts United States dollar as its preferred currency.
The US dollar can be used in isolation or form a parallel coinage with local currency.
Full dollarization is generally implemented by countries at the transitional economic growth phase- especially those suffering from high inflation. Dollarization may, however, occur in various forms:
It is to be noted that the term ‘dollarization’ may include any foreign currency- and not restricted to the United States dollar only. While the US dollar is used as local currency in countries like Ecuador, Marshall Islands and Panama, Euro currency is used as legal tender in Vatican City, Andorra and Monaco.
Dollarization of a foreign country has both advantages and disadvantages.
The advantages of full dollarization include:
The disadvantages of dollarization include:
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This glossary post was last updated: 26th March, 2020 | 4 Views.