Dollarization in El Salvador: Revisited

The economic crisis in different parts of Latin America has given rise to consideration of dollarization as an option for many of these countries. Those countries that seek to replace their domestic currencies with the US dollar do so with the hope of achieving both growth and economic stability. At the beginning of 2001, El Salvador began a bold experiment of with dollarization. According to many economists, dollarization does nothing to resolve structural and institutional problems which, in many cases, give rise to economic problems. The purpose of this paper is to address the dollarization in El Salvador. This paper will address both the costs and benefits facing the path that El Salvador has chose