December 9, 2014

Dollarization and Free Choice in Currency

  • Lawrence H. White

    Distinguished Senior Fellow, F. A. Hayek Program for Advanced Study in Philosophy, Politics and Economics
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The author describes and defends the dollarization of Ecuador in 1999-2000 as a bottom-up phenomenon, an expression of consumer sovereignty by money-users, to which the government finally conceded. From that perspective, he rebuts common top-down (social planner) arguments against dollarization, and criticizes the Ecuadorian government’s current plans to introduce a government-issued cellphone currency. He suggests legalizing private issue of paper and electronic dollar-denominated currencies as a way to neutralize the seigniorage and national-pride objections to dollarization.

Note: This is a written version of his keynote address to conferences on "Quince Años de la Dolarización: Análisis y Perspectivas" [Fifteen Years of Dollarization: Analysis and Perspectives] held in Quito, Ecuador, 12 November 2014, and Guayaquil, Ecuador, 13 November 2014.