ARGT - Dollarization Of Argentina: Revival Of A Zombie Idea

• Last March, a proposal of dollarizing Argentina's economy arrived at its Congress. We summarize here the potential consequences of such a route in case the bill succeeds in getting approval.
• The only result is that monetary policy ceases to be available as an option, leaving almost no response capacity in case of external shocks.
• Moreover, dollarization creates the possibility of being exposed to pro-cyclical monetary policies unrelated to domestic necessities. It also eliminates seigniorage benefits.
• Proposing dollarization under current conditions would require a selective default of domestic currency liabilities, a brutal devaluation, and/or a unilateral conversion of public deposits.

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