Dollarize - Explained
What does Dollarize Mean?
Written by J. Mance Gordon
Updated at April 23rd, 2024
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What is Dollarize?
Most countries have different currencies, but not all. Sometimes small economies use an economically larger neighbor's currency. For example, Ecuador, El Salvador, and Panama have decided to dollarize—that is, to use the U.S. dollar as their currency. Sometimes nations share a common currency. A large-scale example of a common currency is the decision by 17 European nations—including some very large economies such as France, Germany, and Italy—to replace their former currencies with the euro. With these exceptions, most of the international economy takes place in a situation of multiple national currencies in which both people and firms need to convert from one currency to another when selling, buying, hiring, borrowing, traveling, or investing across national borders.
Related Topics
- What Does it Mean to Dollarize
- Foreign Exchange Market
- Who Demands and Supplies Currency in a Foreign Exchange Market?
- Foreign Direct Investment
- Greenfield Investment
- Brownfield Investment
- Portfolio Investment
- Hedging
- Dealers in the Interbank Market
- Weak and Strong Currency
- Depreciation of Currency
- Appreciating and Depreciating Currency
- Exchange Rate
- Real Effective Exchange Rate (REER)
- Limited Flexibility Exchange Rate System
- Expectations about Future Exchange Rates Shift Demand
- Expected rate of return shift demand and supply for a currency
- Relative Inflation Shifts Demand and Supply for a Currency
- Purchasing Power Parity (PPP)
- Relative Purchasing Power Parity
- Law of One Price
- Burgernomics
- Balassa-Samuelson Effect
- Arbitrage
- Tobin Tax
- Foreign Exchange Market
- Foreign Exchange Contract
- Arbitrage
- Hedge
- Why Central Banks Care About Exchange Rates
- How Do Exchange Rates Affect Aggregate Demand and Aggregate Supply?
- What Causes Exchange Rate Fluctuations?
- Exchange Rate Policy
- Fixed Exchange Rate
- Floating Exchange Rate
- Hard and Soft Peg
- What is a Merged Currency?
- Capital Control
- Exchange Stabilization Fund
- Smithsonian Agreement