Dollarization eliminates the capacity to implement monetary policy freely, a move that critics argue leaves a country vulnerable to nominal foreign shocks. Detractors contend that relinquishing a central bank's ability to mitigate the impact of such shocks is ill-advised. This criticism, however, encounters two issues: one theoretical and the other empirical.
Dollarization and Foreign Shocks in Latin America
Dollarization and Foreign Shocks in Latin…
Dollarization and Foreign Shocks in Latin America
Dollarization eliminates the capacity to implement monetary policy freely, a move that critics argue leaves a country vulnerable to nominal foreign shocks. Detractors contend that relinquishing a central bank's ability to mitigate the impact of such shocks is ill-advised. This criticism, however, encounters two issues: one theoretical and the other empirical.