Dollarization
To: Minister of International Trade, Minister of Foreign Affairs, and Minister of International Co-operation
CC: David Eichert
From: Consultant International Ltd.
Date: 10/3/2008
Re: Dollarization with the USA, and Mexico
EXCECUTIVE SUMMARY
In the last few years the dollarization debate has surged ahead regarding monetary policies. With several countries having adopted the US dollar to stabilize their economy in order to ensure economic growth, and along with the successful installation of the Euro has resulted in increased debates regarding a monetary policy between Canada and the US. Several proposals, ranging from unilateral adoption of the US dollar to a full-blown monetary union have both been put forward and received support from numerous politicians and economist among both sides.
This memo will provide an overview regarding the process of adopting the US dollar by the Canadian and Mexican governments. There will be a closer look regarding the advantages and disadvantages from the perspectives of different stakeholders. Furthermore there will be a look at the potential effects that could occur regarding social, political, and economical factors if such a monetary policy would be implemented. Finally after looking at the possible benefits and disadvantages I will recommend what I believe to be in the best interest regarding Canada and Mexico decision to adopt the same currency.
Definition of Dollarization and the Ways it occurs
Dollarization occurs when a country adopts the currency of another country instead of using its own domestic currency. According to Schuler (2003) there are three ways in which dollarizat ...