Title: Currency substitution - Wikipedia
Headings: Currency substitution
Currency substitution
Contents
Name
Origins
Measures
Types
Effects
On trade and investment
On monetary and exchange rate policies
On banking systems
Determinants of the currency substitution process
The dynamics of the flight from domestic money
Institutional factors
Anchor currencies
Australian dollar
Euro
Indian rupee
New Zealand dollar
Pound Sterling
South African rand
US dollar
Countries/regions using the US dollar exclusively
Countries using the US dollar alongside other currencies
Others
See also
References
Footnotes
Works cited

Content: There are a small number of countries adopting a foreign currency as legal tender . Full currency substitution has mostly occurred in Latin America, the Caribbean and the Pacific, as many countries in those regions see the United States Dollar as a stable currency compared to the national one. For example, Panama underwent full currency substitution by adopting the US dollar as legal tender in 1904. This type of currency substitution is also known as de jure currency substitution . Currency substitution can be used semiofficially (or officially bimonetary systems), where the foreign currency is legal tender alongside the domestic currency. In literature, there is a set of related definitions of currency substitution such as external liability currency substitution, domestic liability currency substitution, banking sector's liability currency substitution or deposit currency substitution, and credit dollarization. External liability currency substitution measures total external debt (private and public) denominated in foreign currencies of the economy. Deposit currency substitution can be measured as the share of foreign currency deposits in the total deposits of the banking system, and credit currency substitution can be measured as the share of dollar credit in the total credit of the banking system. Effects
On trade and investment
One of the main advantages of adopting a strong foreign currency as sole legal tender is to reduce the transaction costs of trade among countries using the same currency. There are at least two ways to infer this impact from data.