Research On Dollarization In Latin America

An important outcome of world economy integration, regionalization and globalization is the birth of Euro, dollarization and the idea of "Asian Currency". Although dollarization does not have the rigorous organization and perfect operation mechanism as Euro, as a fact, some kind of mechanism and policy, it now becomes a very important channel for international currency cooperation in some countries. Among the three kinds of regional currency cooperation, dollarization has the most long history, most broad influence, most complex practice and most bewildering prospect.The practice of dollarization in early stage appeared in the 60s and 70s of last century. In the Bretton Woods System, because the dollar is tied to gold, and the currency of every country is tied to the dollar, in practice, the dollar is the sole international currency. In the 70-90s of 20th century, the dollarization phenomenon appeared again in some small and open emerging market countries of Latin America and East European area. At the end of last century, the phenomenon of dollarization in Latin America drew much attention again. In January, 1999, the president of Argentina, Menum, declared that the government of Argentina was considering seriously the adoption of the dollar as the sole legal tender and let its economy fully dollarized. At the same time, the officers of treasury of eight central American countries discussed the pros and cons of dollarization at a special meeting in July, 1999. In 2000 and 2001, Ecuador and Salvador declared to fully dollarize its economy independently. In Mexico, the businessmen also showed strong interest in dollarization. From then on, the phenomenon of dollarization in Latin America has drawn much interest among people all over the world, and the further study about this topic began. This dissertation systematically explores the theoretical and practical issues of dollarization of Latin America in the framework of game theory, and investigates the history, practice, effects, and prospect of dollarization in Latin America.This dissertation includes seven chapters in total. Except the first chapter, the other six chapters explore the practical reasons of dollarization in Latin America, the theoretical explanation of dollarization. the influence of dollarization on Latin American and American economy, the case study of Panama etc., and investigate the prospect of dollarization in Latin America in a game theory framework, and the influence of dollarization on international currency system.The first chapter is introduction. This chapter introduces the research motive and research objective, and explains the definition and main types of dollarization. It defines the main topic of this dissertation-the dollarization of Latin America in detail. Beside that, it investigates the research effort inside and outside China, and introduces the main content and methods of the research.The second chapter investigates the main history and practical reasons of dollarization in Latin America. Through the study of evolution of the economic philosophy in Latin America and the economic reform practice of Latin America in the 80s of last century, it investigates in detail the basic logic between the practice of dollarization and the economic reform of Latin America which was directed by the "Neoliberalism" .The third chapter analyses the reasons of dollarization of Latin America in detail from different theoretical lines. This chapter chooses three theoretical tangles: currency substitution, foreign exchange arrangement and political economics to investigate the dollarization.The forth chapter mainly explores the pros and cons of dollarization of Latin America. This chapter analyses the benefits and costs of dollarization on Latin America, and the influence on American economy. In addition, it explores the appropriate measurements that the Latin American countries and the United States can take to respond to the negative impacts of dollarization of Latin America.The fifth chapter chooses three nations: Panama, Argentina and Ecuador as examples to explore the practice and effects of dollarization. This chapter investigates the background, history, effects, and prospect of dollarization of the three countries.The sixth chapter sets up a game theory framework to explore the prospect of dollarization in Latin America. This chapter shifts the study objective from single country's dollarization to the whole area's dollarization. Through static game analysis and dynamic game analysis, it gets the conclusion that the prospect of dollarization of Latin America is bright. On this basis, this chapter takes up the preliminary attempt to explore the topic of the establishment of the "Dollar Zone", and analyzes two core problems in the course of the establishment of the "Dollar Zone": who acts as the promoter of dollarization and the mechanism of stabilization.The seventh chapter explores the influence of dollarization on international monetary system and the enlightening and guidance for China. Firstly, this chapter analyzes the impacts of dollarization of Latin America on international monetary system from the viewpoints of regional monetary cooperation and international monetary reform. Then it explores how to use the experience of dollarization of Latin America to make China get the benefit of appropriate dollarization and enhance the status of China in regional and international economy. Finally, it discusses the strategies of pushing the internationalized process of RMB.In the end, this dissertation gets a basic conclusion from the analyses above, that is, the practice of dollarization should be matched with the economic condition, and the success of it depends on the economic development of these countries and regions and the macroeconomic policies which they take. However, through the historical perspective, dollarization is a very important way of monetary cooperation for Latin America, and the "Dollar Zone" formed on this basis will eventually add to the Euro Zone and the "Asian Currency Zone" and set up the new international monetary structure, which will impose strong impact on the development of world economy.