Dollarization is a method to:
A)increase the country's seigniorage profit.
B)allow flexibility in the country's exchange-rate.
C)remove exchange-rate risk.
D)sterilize interventions by the central bank.

Question

Quizplus · Accepted Answer

Dollarization means replacing a country's currency with the US dollar, which eliminates the exchange-rate risk. The country adopts a stable currency and does not have to worry about fluctuations in its own currency value. However, it also means losing control over monetary policy and the ability to devalue the currency to increase competitiveness. It does not directly impact seigniorage profit, allow flexibility in the exchange rate, or sterilize interventions by the central bank.

Dollarization Is a Method To