Title: Dollarization Definition
Headings: Dollarization
Dollarization
What Is Dollarization?
Key Takeaways
Understanding Dollarization
An Example of Dollarization

Content: Dollarization usually happens when a country’s own currency loses its usefulness as a medium of exchange, due to hyperinflation or instability. Key Takeaways
Dollarization is when a country begins to recognize the U.S. dollar as a medium of exchange or legal tender alongside or in place of its domestic currency. Dollarization normally occurs when the local currency has become unstable and begun to lose its usefulness as a medium of exchange for market transactions. Dollarization can have both benefits and costs. It typically results in enhanced monetary and economic stability, but necessarily involves loss of economic autonomy in monetary policy. Understanding Dollarization
Dollarization usually occurs in developing countries with a weak central monetary authority or an unstable economic environment. It can occur as an official monetary policy or as a de facto market process. Either through official decree or through adoption by market participants, the U.S. dollar comes to be recognized as a generally accepted medium of exchange for use in day-to-day transactions in a country’s economy. Sometimes the dollar assumes official status as legal tender in the country. The main reason for dollarization is to receive the benefits of greater stability in the value of currency over a country's domestic currency.