Has the Time Come for Dollarization in the Americas?
Last week I did a very interesting (to me at least) panel at CATO on dollarization in Latin America, focusing on Argentina. I was with Emilio Ocampo and David Malpass and moderated by Ian Vásquez. Yes, we agreed, but why and how is subtle. Link here at Cato or click on the picture.
Update: Here is an excellent summary by Marcos Falcone on the Cato substack.
Dollarization may make sense for countries that have destroyed monetary credibility through repeated inflation, fiscal dominance, and failed central banking. In that sense, Cochrane’s “precommitment” argument is strong.
But dollarization should not be treated as a purely technical monetary reform. It is also a form of geopolitical and institutional incorporation into the dollar system.
For Argentina or Venezuela, it may reduce inflationary discretion and import credibility. But it also shifts adjustment from exchange-rate depreciation and inflation toward fiscal austerity, wage-price adjustment, external financing constraints, and deeper dependence on U.S.-centered banking, payments, liquidity, and legal infrastructure.
That is why the Cato framing matters. In the Western Hemisphere, dollarization is not only about monetary stability. It is also about the United States re-anchoring regional financial order at a time when China, commodities, infrastructure finance, and geopolitical competition are reshaping Latin America.
Of potential interest: https://direct.mit.edu/books/edited-volume/2099/DollarizationDebates-and-Policy-Alternatives