Which Countries in the Americas Should Dollarize?
This chapter discusses the benefits and costs of full dollarization. Benefits include lower transaction costs, lower inflation and interest rates, and increased openness and international financial integration. Costs include lost seigniorage, loss of independent monetary and exchange rate policies, and loss of lender of last resort. The best candidates for full dollarization are small countries in Latin America and the Caribbean with small open economies for which the United States is the dominant economic partner.
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