
Costs and Benefits of Dollarization
Evidence from North, Central, and South America
- Georgios Karras
- 세종대학교 경제통합연구소
- Journal of Economic Integration
- 제17권 제3호
- 등재여부 : KCI등재
- 2002.09
- 502 - 516 (15 pages)
This paper examines the macroeconomic costs and benefits of dollarization. Economic theory suggests that the main benefit is enhanced price stability, while the main cost is higher business-cycle volatility if the dollarizing country s output is not sufficiently correlated with that of the U.S.Data from 1950-1997 are used to estimate various cost and benefit measures for nineteen North, Central,and South American countried. The paper finds that these cost and benefit factors exhibit substantial variability across the ciuntries considered. Furthermore, they are strongly positively correlated: countries(such as Peru) that have a lot to gain from dollarization, also have a lot to lose from it: while countries(such as Canda) that have little to lose by dollarizing, have also little to gain by it. The empirical results can be also used to compare net benefits for individual countries, showing, for example, that Chile is a better dollarization candidate than Mexico.
Ⅰ. Introduction
Ⅱ. Theoretical Background
Ⅲ. Data and Empirical Methodology
Ⅳ. Empirical Results
Ⅴ. Conclusions