Widespread dollarization, would have a similar effect as a fixed exchange rate,
such as the gold standard or Bretton Woods. Except that the degree of fixity
would be much greater. (much less opportunity to cheat). And as such it would
have the advantages and disadvantages of a fixed exchange rate.
Rod
Jim Devine wrote:
> talking a break...
>
> >CB: What's important about dollarization ?
>
> quoth Max:
>
> >That's what I was hoping others could tell me.
> >
> >Off the top of my head, it would seem to have dire implications for the
> >independence of other countries and the adequacy of their money supply,
> >from the standpoint of employment and investment.
>
> if by "dollarization" you mean the case of Argentina hooking its currency
> irrevocably to the US$, what it means is that Alan Greenspan will do their
> monetary policy. If they're in a recession and Saint Alan decides to hike
> interest rates, cry for me Argentina! They'd also suffer (or benefit) from
> the US fiscal stance.
>
> It's like the long period of slow growth in California that preceded the
> last few years of boom. California couldn't use monetary (or fiscal) policy
> to try to catch up with the rest of the US.
>
> Of course, Argentina could secede from the dollar more easily than
> California could.
>
> Jim Devine [EMAIL PROTECTED] & http://liberalarts.lmu.edu/~jdevine
--
Rod Hay
[EMAIL PROTECTED]
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