Lessons from Dollarization in Latin America in the 21st Century
28 Pages Posted: 6 Jan 2023 Last revised: 7 Mar 2023
Date Written: March 7, 2023
This paper looks at 21st-century dollarization in Latin America. We emphasize that dollarization is a complex reform that can be implemented in many different ways. We draw three important lessons from these experiences: (1) keeping the central bank after dollarizing is an unnecessary institutional vulnerability that facilitates compulsive de-dollarization, (2) public opinion offers the most important defense of dollarization against populist attempts at reversal, and (3) even if dollarization is not supported with structural reforms (or such reforms are reversed), it remains superior to the counterfactual of no re-forms with persistent, high and volatile inflation.
Keywords: dollarization, constitutional monetary policy, Latin America
JEL Classification: E42, E50
Suggested Citation: Suggested Citation