Add to ORKGThis study gives a non-traditional framework for the evaluation of the convenience of an asymmetric monetary association (such as dollarization), from the point of view of the country that gives up its monetary sovereignty. In the analytical part we discuss the relationship between nominal volatility, real volatility and country risk. Given the social loss function of the policymaker, we determine the necessary conditions for dollarization to improve social welfare. With this in mind, we concentrate in the analysis of two main aspects: 1) the degree of synchronization existing between the cycle of the leader and associated country, and 2) the effect and relative importance of the different channels (the trade and financial channels) that tr...
