Global Implications of Dollarizing Economies to Attain Monetary Stability

             Global Implications of Dollarizing Economies to Attain Monetary Stability
             Dollarization is when one country abandons its own currency in favor of
             another country's currency. This is good because it will provide a stable currency but
             unfortunately the country who changed it's currency has no monetary independence
             and no power to print currency. This means that the country controlling the currency
             may not keep in mind the affect actions may have on the secondary country's
             economy. This is an example of a fiscal policy because it deals with the way a
             country handles its money. Other examples of fiscal policies are floating currencies,
             pegged or currency board, and a monetary union. The two latter have what we call
             fixed exchange rates. This is when currency rates dealing with trade is regulated and
             doesn't differ trade from trade. It helps the currency remain stable and dependent for
             businesses. A currency board is one example of a fiscal policy that has a fixed
             currency exchange. This situation is when a local currency is used but to instill
             stability the local currency is backed by another currency held by a central bank. One
             reason this system brings stability because a currency board can't print money without
             The Netherlands has a rather interesting monetary order because of
             their environment. They have a current system where the local currency is Netherlands
             guilders, gulden, or florins and this has had a fixed exchange rate with the US dollar
             since 1989 of 1.79 gullden to US$1. There environment makes this interesting
             because Netherlands was one of eleven countries to enter the European Union(EU), a
             monetary union of European countries. This is important because the union just
             introduced a common currency of the euro witch has a fixed rate of 2.20371 guilders
             per euro. The euro will replace the local currency in consenting countries fo
             ...

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Global Implications of Dollarizing Economies to Attain Monetary Stability. (1969, December 31). In MegaEssays.com. Retrieved 17:44, March 28, 2024, from https://www.megaessays.com/viewpaper/56142.html