What Is Dollarization? What Are Some of the Benefits and Cost

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The Answer is Dollarization is the situation whereby a nation adopts another nation's currency as its legal tender.The benefits of dollarization arise from the nation: avoiding the cost of exchanging the domestic currency for dollars and the need to hedge foreign exchange risks,facing an inflation and interest rate similar to that of the United States,avoiding foreign exchange crises and the need for foreign exchange and trade controls,and fostering budgetary discipline and encouraging more rapid and full international financial integration.The costs are: the cost of replacing the domestic currency with the dollar,the loss of independence of monetary and exchange rate policies,and the loss of its central bank as a lender of last resort and other financial institutions in case of a crisis.

What Is Dollarization? What Are Some of the Benefits and Cost

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What Is Dollarization? What Are Some of the Benefits and Cost

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