Dollarization

Dollarization

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Dollarization occurs when the inhabitants of a country use foreign currency in parallel to or instead of the domestic currency.

Dollarization can occur

unofficially, without formal legal approval
semiofficially (or officially bimonetary systems), where foreign currency is legal tender, but plays a secondary role to domestic currency
officially, when a country ceases to issue the domestic currency and uses only foreign currency.

The term dollarization is not only applied to usage of the United States dollar, but also generally to the use of any foreign currency as the national currency.

Until 1999, official dollarization received practically no attention because it was considered politically impossible.^{citation needed} Since then it gained prominence after several countries have considered and implemented it as official policy. The major advantage of dollarization is to promote greater financial stability and a lower inflation rate.

The most important officially dollarized economies as of June 2002 were Ecuador (since 2000), El Salvador (since 2001) and Panama (since 1904).

As of August 2005, the United States dollar, the euro, the New Zealand dollar, the Swiss franc and the Australian dollar were the only currencies used by other countries for official dollarization. In addition, the Turkish new lira, the New Israeli Shekel, and the Russian ruble are used by internationally unrecognised but de facto independent states.

1 List of officially dollarized economies
2 See also
3 External links

List of officially dollarized economies

Worldwide use of the U.S. dollar and the euro: United States External adopters of the US dollar Currencies pegged to the US dollar Currencies pegged to the US dollar within narrow band Eurozone External adopters of the euro Currencies pegged to the euro Currencies pegged to the euro within narrow band

U.S. dollar

Euro

Kosovo
Monaco (formerly French franc; issues own euro coins)
Andorra (formerly French franc and Spanish peseta)
San Marino (formerly Italian lira; issues own euro coins)
Vatican City (formerly Italian lira; issues its own euro coins)
Montenegro (formerly German mark and Yugoslav dinar)
Former French territories continue to peg their currencies to that of France. See CFA Franc, CFP Franc, Comorian Franc.