Does dollarization benefit developing countries?
Dollarization occurs when a nation allows the currency of another nation to be used as a legal currency. That is partial dollarization. Full dollarization, while less frequent, occurs when a nation discontinues it’s own currency and replaces it with the currency of another country. Most commonly the foreign currency is the US Dollar, but the Euro is used by a number of European countries that are not part of the European Union.
Review the Dollarization document provided, information in the textbook, as well as web based sources. A good approach is to examine a specific country that has dollarized. Dollarization.doc
You then take the information you have learned and present it as a formal case study report. For this case a specific recommendation is not required. After a discussion of what dollarization is and the advantages and disadvantages of dollarization, you would conclude with a brief review of the conditions under which a country would benefit from dollarization. That becomes an implicit recommendation to dollarize when those conditions exist. Alternatively, if you conclude that dollarization is not a benefit, then you would explain why you recommend that nations not dollarize.
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