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Dollarization System

2023/2/24 18:26:12  Classification:   Participation: 8  

Dollarization System (DollarizationSystem) What rebatemeaninginforex Dollarization System Dollarization System is a rebateinforextrading of giving up the local best forex rebate rebatesinforex using the dollar to perform all the functions of the currency instead of the local currency Dollarization System is an extreme, stronger system than monetary union This system is a system in which countries completely give up their own currency, and they do not share a currency with their close trading partners. The disadvantage of this system is that it does not have its own independent interest rate and exchange rate policy to adapt to the domestic situation. The bestforexrebate system is usually implemented because citizens have completely lost confidence in the central bank and do not expect it to change for the better in the future. but not yet a monetary system; the latter is when the monetary authority explicitly announces the replacement of the local currency with the U.S. dollar and dollarization is established as a monetary system dollarization is a monetary system being considered by Latin American countries Ecuador and El Salvador implemented dollarization in 2001 Guatemala also adopted the U.S. dollar as a fiat currency in 2001, but it retains the local currency and does not establish parity between the local currency and the U.S. dollar Argentina, Mexico, and other Latin American countries are actively preparing for dollarization Comparison between dollarization and currency cashback forex systems Dollarization and currency boards have similar characteristics: 1. Currency board systems are actually lesser degrees of dollarization 2. Dollarization, on the other hand, is a complete currency board system Under a dollarization system, the dollar is not just a guarantee of issuing the local currency, but replaces the local currency to perform the function of money Therefore, the difference between the currency board system and the dollarization system is mainly the difference between the extent of the role of the dollar and the existence of the domestic currency. The dollarization system has the above-mentioned defects of the currency board system, and in the following two aspects is more than the currency board system: 1, under the conditions of the dollarization system, the dollar replaces the domestic currency, the minting tax revenue is completely lost although the currency board system also occurs the loss of minting tax revenue. But the international reserve currency, which is a guarantee of currency issuance, is usually kept in the form of deposits in commercial banks and government bonds, and deposits and bonds can earn income, so the loss of minting tax revenue caused by the currency board system is relatively small. 2. Although the monetary authority no longer has an independent monetary policy under the currency board system, the national or regional currency still exists, and the country or region still has at least nominal Monetary sovereignty under dollarization conditions, the national or regional currency no longer exists, the country or region has completely abandoned monetary sovereignty dollarization system solves the most important defect of the currency board system, that is, the defect of vulnerability to speculative shocks of international capital in the dollarization system, there is no longer a local currency exchange rate system against the dollar, thus avoiding speculative shocks of international capital

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