Skip navigation
Hardcover | $10.75 Short | £7.95 | ISBN: 9780262122504 | 351 pp. | 7 x 9 in | 31 illus. | November 2002


Debates and Policy Alternatives


With the persistent instability of international financial markets, emerging economies are exploring new ways to reduce exposure to capital flow volatility. Some analysts argue that financially open economies are best served by more flexible regimes, while others argue in favor of extreme exchange rate regimes that have a strong commitment to a fixed parity or dispense with an independent currency. The successful launch of the euro has made more realistic the prospect of replacing a national currency with a strong foreign one. Recent examples include the adoption of the US dollar by Ecuador and El Salvador.

The introduction of a foreign currency as sole legal tender, termed full (de jure) dollarization, has been the center of much political and academic debate. This book provides a comprehensive analysis of the issues from both theoretical and empirical perspectives. The topics discussed include the role of balance sheet effects, the linkage between currency risk and country risk, the impact of dollarization on trade, financial integration and credibility, the implications of dollarization for the lender of last resort, and the institutional and political economy aspects of dollarization.

About the Editors

Eduardo Levy Yeyati is Director of the Center for Financial Research at Universidad Torucato Di Tella in Buenos Aires.

Federico Sturzenegger is President of the Banco Ciudad de Buenos Aires. He is the coauthor, with Jeromin Zettelmeyer, of Debt Defaults and Lessons from a Decade of Crises (MIT Press, 2007).


“This is a timely volume. It collects a number of important contributions on a highly controversial issue: Should the emerging countries have a currency of their own? The papers in this collection address some very important questions, including those related to country risk, economic performance and the political economy of dollarization. It is required reading for anyone interested in monetary policy in the emerging and transition economies."”
Sebastian Edwards, Professor of International Economics, University of California, Los Angeles
“Dollarization has been the subject of all too much fast and loose analysis. This book, for once, asks the hard questions. Rather than conveniently assuming that dollarization will encourage macroeconomic and structural reforms, it analyzes the circumstances under which this hoped-for scenario will obtain. It will be the standard work for scholars and officials prepared to take the question of dollarization seriously.”
Barry Eichengreen, University of California