Exploring Dollarization: Impacts and Implications for Global Economies

Introduction

Dollarization, the process by which a country adopts the U.S. dollar as its official currency, or uses it alongside its domestic currency, has gained increasing attention in the global economic landscape. This paper aims to explore the impacts and implications of dollarization on national economies, particularly focusing on its effects on monetary policy, economic stability, and international trade. By examining case studies and empirical evidence, this report will elucidate the advantages and disadvantages of dollarization, ultimately assessing its role in shaping the economic trajectories of both dollarized and non-dollarized countries.

Main Body

Dollarization can be classified into two types: official dollarization, where the U.S. dollar is adopted as the sole legal tender, and unofficial or de facto dollarization, where the dollar is used alongside the domestic currency without formal endorsement. Countries like Ecuador and El Salvador have officially dollarized, while others, such as Argentina, have seen significant dollarization in daily transactions despite maintaini