Dollarization and Free Choice in Currency

21 Pages Posted: 10 Dec 2014

See all articles by Lawrence H. White

Lawrence H. White

George Mason University - Department of Economics; George Mason University - Mercatus Center

Date Written: December 9, 2014


I describe and defend the dollarization of Ecuador in 1999-2000 as a bottom-up phenomenon, an expression of consumer sovereignty by money-users, to which the government finally conceded. From that perspective I rebut common top-down (social planner) arguments against dollarization, and criticize the Ecuadorian government’s current plans to introduce a government-issued cellphone currency. I suggest legalizing private issue of paper and electronic dollar-denominated currencies as a way to neutralize the seigniorage and national-pride objections to dollarization.

Note: This is a written version of my keynote address to conferences on "Quince Años de la Dolarización: Análisis y Perspectivas" [Fifteen Years of Dollarization: Analysis and Perspectives] held in Quito, Ecuador, 12 November 2014, and Guayaquil, Ecuador, 13 November 2014.

Keywords: Dollarization, Ecuador, consumer sovereignty, seigniorage, optimum currency area

JEL Classification: E58, E65, F33

Suggested Citation

White, Lawrence H., Dollarization and Free Choice in Currency (December 9, 2014). GMU Working Paper in Economics No. 14-44, Available at SSRN: or

Lawrence H. White (Contact Author)

George Mason University - Department of Economics ( email )

4400 University Drive
Fairfax, VA 22030
United States

George Mason University - Mercatus Center ( email )

3434 Washington Blvd., 4th Floor
Arlington, VA 22201
United States


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