- 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.
For further details see:
Dollarization Of Argentina: Revival Of A Zombie Idea