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The Pros And Cons Of Dollarization In The United States

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Dollarization occurs when a country, officially or unofficially, utilizes another country 's currency as legal tender to conduct transactions. Countries mainly use dollarization to benefit from the greater stability in the value of a foreign currency over their domestic currency (Berg, Andrew). The con of dollarization is that the country is not able to influence its own monetary policy by adjusting the money supply. Dollarization usually occurs in developing countries with a weak central government or an unstable economic environment (Berg, Andrew). For instance, a country undergoing significant inflation may choose to use a historically stable currency, such as U.S. dollar, to conduct day to day transactions, since inflation reduces the

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