Speaker:
Michael Albert, PhD Candidate, UCSB Department of Political Science

A significant consequence of economic interdependence has been the dollarization of financial systems in many developing countries. Dollarization means that some popular currency (most often, the US Dollar), comes to perform the traditional functions of money: unit of account, store of value, and medium of exchange within the domestic economy. While dollarization may produce considerable benefits - including a defense against inflation and stimulus to investment - it also limits the ability of governments to raise revenue through the production of money, restricts the state’s ability to conduct monetary and exchange rate policy, and increases exposure to foreign political coercion.

To date, only a few countries have successfully reduced the presence of foreign currency in the domestic economy, what may be called pursuing de-dollarization. Today, however, more governments are attempting to recapture a degree of monetary policy autonomy through de-dollarization. My research suggests that measures to promote de-dollarize may diffuse among governments as a result of learning about how to craft policy.