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What does Dollarization mean when used with Regards to Money?

  • September 2014
  • Posted By Ninoslav
  • 0 Comments

This is not merely a term now, but instead a phenomenon. On hearing a term like Dollarization for the first time, one would think of the US Dollar overhauling a certain currency. That would be true to an extent, yes, but not entirety. There is another suitable term which you may prefer to use more – Currency Substitution.

Such a phenomenon came into existence when many countries started to make use of one common currency widely, that is the US dollars, in place of their domestic one. This was due to this reason that USD is one of world’s most used currency, and also a strong one. But soon, other currencies also started to evolve as substitution of currencies of other nations.

Birth of the Euro and other matters
The European Union, commonly known as EU, added further fuel to this process when it paved the way for one of the world’s widely used currency now, the Euro. Almost every country in Europe has adopted Euro as its trending currency. Such a measure has also eased many matters of trade and economic functionalities between those countries.

Apart from legally choosing foreign currencies to trend widely in the domestic market, there are other instances of Dollarization also. There are many known types of substitution of currencies, some of which are as follows:

  • Unofficial or de facto Substitution
  • Official or Full Substitution
  • Semiofficial Substitution
  • External Liability Substitution

And many more than one can come across while studying Economics. Each of the above mentioned terms can also be studied in details, which would present a clearer picture. But here, this is all that can be offered on Dollarization. But if you have a fetish of reading on matters related to money, why not try and go through “What do people mean when they mention Currency Future”?

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