Dollarization and Poverty

Abstract

In terms of international economic reform, dollarization is currently one of the most highly debated topics. Economists are dedicating a countless amount of time to discussing dollarization. Discussion is at a wide range, from what exactly dollarization is, to what it would do for different economies, to how it would be implemented. There are hundreds of different opinions circulating regarding the topic. Should Latin American countries adopt the US dollar? This paper addresses the topic through analysis from different angles. There is discussion about how US economies would fare after dollarization, and what kind of effects could be expected in Latin America. Chapter one describes the economic history of Latin America. In order to consider adopting a whole new currency, a country needs to be having some pretty significant economic problems. Not only that, but it must have a history of economic problems, as dollarization is a intricate and complex process that would not be considered unless simpler solutions were already attempted. Chapter two explores the possible outcomes of dollarization, suggests problems that could arise, and solutions to those problems. This chapter discusses dollarization from nearly every angle possible in order to effectively conclude whether or not dollarization would be the economically intelligent choice for Latin America. Chapter three focuses on the links between dollarization and poverty reduction. There is analysis of statistical data in order to test whether or not there is a direct reduction in poverty as a result of dollarization. The goal of this paper is to attempt to resolve whether or not Latin America should adopt the US dollar, taking into account nearly every factor possible. This paper attempts to inform the reader of these factors, and draw its own conclusions as to whether or not dollarization is the smartest economic path.