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Dollarization
From Wikipedia, the free encyclopedia
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Please help improve this article or section by expanding it. Further information might be found on the talk page or at requests for expansion. This article has been tagged since January 2007. |
Dollarization occurs when the inhabitants of a country use foreign currency in parallel to or instead of the domestic currency.
Dollarization can occur
- unofficially, without formal legal approval
- semiofficially (or officially bimonetary systems), where foreign currency is legal tender, but plays a secondary role to domestic currency
- officially, when a country ceases to issue the domestic currency and uses only foreign currency.
The term dollarization is not only applied to usage of the United States dollar, but also generally to the use of any foreign currency as the national currency.
Until 1999, official dollarization received practically no attention because it was considered politically impossible. Since then it gained prominence after several countries have considered and implemented it as official policy. The major advantage of dollarization is to promote greater financial stability and a lower inflation rate.
The most important officially dollarized economies as of June 2002 were Ecuador (since 2000), El Salvador (since 2001) and Panama (since 1904).
As of August 2005, the United States dollar, the Euro, the New Zealand dollar, the Turkish lira, the Russian ruble, the Swiss franc, and the Australian dollar were the only currencies used by other countries for official dollarization.
See also: American currency union
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- British Virgin Islands
- East Timor
- Ecuador (uses its own coins)
- El Salvador
- Marshall Islands
- Federated States of Micronesia
- Palau
- Panama (uses its own coins)
- Pitcairn Islands (also uses the New Zealand dollar)
- Turks and Caicos Islands
- Northern Mariana Islands
- Kosovo
- Monaco (formerly French franc; issues own Euro coins)
- Andorra (formerly French franc and Spanish peseta)
- San Marino (formerly Italian lira; issues own Euro coins)
- Vatican City (formerly Italian lira; issues its own Euro coins)
- Montenegro (formerly German mark and Yugoslav dinar)
- Gibraltar (accept both Pound sterling and Euro)
- Former French territories continue to peg their currencies to that of France. See CFA Franc, CFP Franc, Comorian Franc.
Even though these states are not recognized internationally, they exist de-facto.
- Cook Islands
- Niue
- Tokelau
- Pitcairn Island (also uses U.S. dollar)
- Cyprus, Northern (Turkish lira)
- Liechtenstein (Swiss franc)
- Bhutan (Indian rupee, to which it is pegged)
- Dollarization.org (Reference for list of dollarized economies)
- Latin Business Chronicle: Latin American Dollarization Reports & Links
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