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Dollarised Economy Macroeconomics

Author

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  • Francois Boye

    (Independent Consultant)

Abstract

Which kind of open economy macro-economics results from the adoption of dollarisation as an exchange rate and monetary regime? To answer this question, this paper revisits the famous Dornbusch model exposed in the 1976 JPE article on .Expectations and Exchange Rate Dynamics., a structuralist model and the Obstfeld-Rogoff redux model. Its findings are as follows: dollarisation can be an inflationary shock; dollarisation is no guarantee of a price or interest rate convergence between the dollarised economy and the USA; dollarisation does not change necessarily the long term GDP prospects of an economy; dollarisation does not make economic policy more capable of affecting the long term prospects of an economy; dollarisation is no guarantee of economic stability.

Suggested Citation

  • Francois Boye, 2004. "Dollarised Economy Macroeconomics," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 6(1), February.
    • Handle: RePEc:bej:issued:v:6:y:2004:i:1:boye
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    More about this item

    Keywords

    Dollarisation; open economy macro-economics; economic policy; macro-economic stability;
    All these keywords.

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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