Official Dollarisation: A realistic option for Caricom

Author(s): Belgrave, Anton; Campbell, Trevor; Greenidge, Kevin; Straughn, Ryan (2001)

Created 22 Jul, 2001
Categories Working Papers
Views: 2087
Dollarisation occurs when residents of a country extensively use the US dollar or another foreign currency alongside or instead of the domestic currency. The paper attempts to assess the relative advantages and disadvantages of the adopting of the US dollar as the official currency for the countries of the Caribbean Community and Common Market (CARICOM). The implementation of a single currency for the regional grouping ahs proven to be especially difficult and at present the grouping can be divided into those countries that float their currencies and those whose currencies are fixed against the US dollar. Among CARICOM member countries, domestic currency is used as legal tender while foreign currency is required for settling overseas transactions. Dollarisation has been mooted as an alternative to the establishment of a common Caribbean currency. Indeed, some authors have argued that dollarisation may be a preferred option. As a result, some attempt will be made in this paper to analyse whether the US dollar is a realistic option as the official currency of CARICOM. Section one will address the pros and cons of dollarisation. Section two will briefly look at some countries that have adopted or agreed to dollarisation. The third section will attempt to discuss this topic with respect to CARICOM. A conclusion will then follow.

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