Argument: Dollarization has historically improved economic growth

Issue Report: Dollarization


  • “Basics of Dollarization”, Joint Economic Committee Staff Report July 1999, Updated January 2000 “So far, we have just a list of the costs of official dollarization versus the benefits. The analysis would be better if we could measure them in terms of GDP gained or lost. If official dollarization really is beneficial, it should result in higher economic growth than would otherwise exist. The government of Argentina has estimated that official dollarization there would increase economic growth as much as 2 percentage points of GDP a year. Even if the United States shared no seigniorage, the cost in lost seigniorage would be only about 0.2 percent of GDP a year (BCRA 1999). And as has been mentioned, developing countries without central banks have generally had better monetary and economic performance than those with central banks, which suggests that the benefits of official dollarization would far exceed the costs for most or all countries that are likely candidates.”
  • Daniel Gross. “The Case for Fewer but Stronger Currencies”. New York Times. February 19, 2006 – “Steve H. Hanke, professor of applied economics at Johns Hopkins University, has examined economic development in 32 countries that adopted foreign currencies from 1950 and 1993. He found that they had faster rates of G.D.P. growth, lower inflation and greater fiscal discipline than their counterparts who hung onto their sovereign currencies. Professor Hanke has been an adviser to Ecuador, which in 2004 was among the best-performing economies in Latin America, growing at a 6.6 percent rate with inflation at 2.7 percent.
‘Dollarization tends to deliver low inflation, and relatively low and stable interest rates,’ said Ricardo Hausman, a former chief economist of the Inter-American Development Bank who now teaches at the Kennedy School of Government at Harvard.”