Dedollarisation
Abstract
This research paper explains dollarization and de-dollarization. Expanding the literature on, discussing the factor that leads to dollarization and its effect. How microeconomic and macroeconomic factors changes. And why there is need arise to enforce de-dollarization. And we further discuss the pros and cons of dollarization. And what is the impact after de-dollarization.
Introduction
Dollarization, since the early 1970s, has been a topic of special interest in the context of developing countries. During periods of macroeconomic and political uncertainty, many developing countries experienced a partial replacement of their domestic currencies by a foreign currency either as a store of value, unit of account or as a medium of exchange.
However, after a flow in economic literature on currency substitution, where the effectiveness of monetary policy was the issue, the efforts to stabilize inflation relegated dollarization to a secondary role. In Uruguay, Turkey, Peru even though the topic never lost its appeal, the apparently never-ending appreciation of the national currency started in the midst made the efforts of the advocates of de-dollarization fade as the debt ratios plummeted. .The development of (dollar) credit observed in the second half of the nineties was the key to the generalized bankruptcy following the 2002 crisis. Additionally, such risk threatens to, become a liability to the taxpayers in an economy. The paper proceeds as follows. We start by surveying the literature on dollarization. We finish by setting up the basis for a strategy to reduce the financial vulnerability of our economy.
Dollarization
Dollarization refers to the use by the residents of one country of assets (or liabilities) denominated in another country's currency and can take many forms.
De-dollarization
A successful de-dollarization policy makes the local currency more attractive toresidents than foreign currency. De-dollarization entails a mix of
This research paper explains dollarization and de-dollarization. Expanding the literature on, discussing the factor that leads to dollarization and its effect. How microeconomic and macroeconomic factors changes. And why there is need arise to enforce de-dollarization. And we further discuss the pros and cons of dollarization. And what is the impact after de-dollarization.
Introduction
Dollarization, since the early 1970s, has been a topic of special interest in the context of developing countries. During periods of macroeconomic and political uncertainty, many developing countries experienced a partial replacement of their domestic currencies by a foreign currency either as a store of value, unit of account or as a medium of exchange.
However, after a flow in economic literature on currency substitution, where the effectiveness of monetary policy was the issue, the efforts to stabilize inflation relegated dollarization to a secondary role. In Uruguay, Turkey, Peru even though the topic never lost its appeal, the apparently never-ending appreciation of the national currency started in the midst made the efforts of the advocates of de-dollarization fade as the debt ratios plummeted. .The development of (dollar) credit observed in the second half of the nineties was the key to the generalized bankruptcy following the 2002 crisis. Additionally, such risk threatens to, become a liability to the taxpayers in an economy. The paper proceeds as follows. We start by surveying the literature on dollarization. We finish by setting up the basis for a strategy to reduce the financial vulnerability of our economy.
Dollarization
Dollarization refers to the use by the residents of one country of assets (or liabilities) denominated in another country's currency and can take many forms.
De-dollarization
A successful de-dollarization policy makes the local currency more attractive toresidents than foreign currency. De-dollarization entails a mix of