Dollarization and Economic Performance: An Empirical Investigation

29 Pages Posted: 5 May 2001 Last revised: 12 Aug 2022

See all articles by Sebastian Edwards

Sebastian Edwards

University of California, Los Angeles (UCLA) - Global Economics and Management (GEM) Area; National Bureau of Economic Research (NBER)

Date Written: May 2001

Abstract

In this paper I investigate the historical record of countries that have lived under a 'dollarized' monetary system. As it turns out, this is a very small group of counties, most of which have operated under very special circumstances, and for which there are very limited data. The results reported in this paper suggests that, when compared to other countries, the dollarized nations have: (a) have had significantly lower inflation; (b) grown at a significantly lower rate; (c) have had a similar fiscal record; (d) have not been spared from major current account reversals. Additionally, my analysis of Panama's case suggests that external shocks result in greater costs - in terms of lower investment and growth - in dollarized than in non-dollarized countries.

Suggested Citation

Edwards, Sebastian, Dollarization and Economic Performance: An Empirical Investigation (May 2001). NBER Working Paper No. w8274, Available at SSRN: https://ssrn.com/abstract=268883

Sebastian Edwards (Contact Author)

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