Dollarization Of The Latin American Economy

Since the 1990's, the continual world financial and economic crises have had close connection with the exchange regimes. Nowadays it has become a focal point that how the developing countries, especially emerging economies, avoid negative influences caused by financial globalization and eliminate exchange rate risk. Without exception, the Latin-American economies severely hit by the crises also show greater interest in exploring new ways to reduce exposure to financial instability. Some analysts and policy-makers argue that Latin-American economies substitute U.S dollar for their own independent currency in accordance with their own situations to eliminate the exchange rate risk and the root of the crises. The introduction of dollarization has been the center of much political and academic debate. This essay begins with the concept of dollarization, then provides a brief introduction of its categories, causes and conditions. On the basis of introduction, the author offers a comprehensive analysis of three typically dollarized Latin-American economies who are Panama, Ecuador and Argentina, summarizes the pros and cons of dollarization in Latin -American economies, and draws a preliminary conclusion that dollarization does not apply all Latin -American economies. Furthermore, the author analyzes the goods and bads of dollarization to America, along with American policy-makers selfish attitudes towards it. After weighing the pros and cons of dollarization to the Latin -American economies and to American economy respectively, author comes to a final conclusion: there is a long way for Latin-American economies to execute dollarization .At present, For most Latin-American economies, dollarization is not the best alternative, sometimes even dangerous and risky.