Dollarization adopts a strong currency (not necessarily US dollars) as the country’s official
currency. It can be considered as a variant of fixed exchange rate regime with an even
stronger commitment mechanism than a currency board.
Advantages
(1) Dollarization can completely prevent the possibility of speculative attacks.
Disadvantages
(1) Besides the country has no independent monetary policy, it also loses seigniorage,
i.e., the revenues that a government receives by issuing money.
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