Testimony On Full Dollarization

Abstract

I will discuss the motivation and potential benefits of full dollarization, namely, abandoning domestic currency (identified with the peso) and adopting a foreign currency (identified with the U.S. dollar), with special reference to emerging-market economies. I will argue, first, that full dollarization is especially advantageous for countries with large dollar debts, and, second, that in these economies standard criticisms against full dollarization are largely unwarranted.