Dollarization: Debatabase - Debate Topics and Debate Motions

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Intro to Debatabase
Summary: Should countries change their official currency to the U.S. Discuss topic
Debatabase Junior dollar?
Contributing Topics
Commission Topics Introduction
My Topics Author:Sarah Monroe ( United Kingdom ) Sarah is a student at Oxford university, studying economics.
Submit Topic She was captain of the English World Schools team in 2000 and is now an experienced university
Suggest Topic debater and judge.

Created: Saturday, January 04, 2003

Last Modified: Saturday, January 15, 2011

Context
Official dollarization involves a country abandoning an independent currency. In dollarized countries,
only a foreign currency is legal tender (though local coins may be produced). Dollarization usually
involves the US dollar, but may increasingly refer to conversion to other currencies such as the Euro.
Panama, Ecuador and El Salvador are all currently "dollarized", as are many small countries including
East Timor, and dollarization was seriously suggested as a solution to Argentina’s economic crisis.
Dollarization is different from monetary union because the US continues to set monetary policy in its
own interest alone, whereas the European Central Bank (for example) is required to take all Eurozone
countries’ interests into account.

Arguments

Pros Cons
2011 Bosnia and Herzegovina
Leadership Program Full dollarization is the only exchange rate system that Currency crises can be better avoided under floating
Exact dates TBA. Eighteen can protect countries from currency crises. The exchange rates. If the government does not try to fix
high school students and three Argentine and East Asian crises showed that partially the exchange rate, then the rate will constantly adjust,
teachers from Bosnia and fixed exchange rates expose countries to the risk of with gradual falls instead of sharp crises.
Herzegovina (BiH) attend the sharp falls in the exchange rate when speculators
highly interactive Youth attack. Under dollarization there is no exchange rate
Leadership Program and
to be attacked, so speculators have no role.
accompanying Teacher
Professional Development Dollarization reduces the risk of inflation. Other methods are available to limit inflationary
Program, in Salem, Oregon, Governments, especially in developing countries, are tendencies. Independent central banks are widely
and Washington, DC.
very bad at controlling inflation. They always want to used in the developed world, and can work for
More about this event increase short term growth at the expense of long developing countries if effort is put in to designing the
term stability. Governments should tie their own hands institutions correctly. It is ridiculous to suggest
through dollarization to make their anti-inflation governments should restrict their own ability to help
rhetoric credible. The fear of high inflation is a major their economies, just because some governments
factor inhibiting investment in developing countries. have sometimes misused this power.

Monetary policy is not actually very useful. Countries By losing the ability to set interest rates, governments
are just as likely to abuse it and cause high inflation as lose the ability to help their country in a recession.
they are likely to use it correctly. Developing countries When times are bad, they are unable to devalue their
Slovak Debate Association: never truly have independent monetary policy currency in order to increase demand and encourage
Bratislava Schools' anyway, their economies are heavily affected by the recovery. Monetary policy is a key tool for managing
Competition United States’ policies even without dollarization, your economy, and giving it up exposes countries to
The Slovak Debate since changes in the US interest rate change demand economic slumps that cannot be corrected. Unlike in a
Association would like to invite for their exports. currency union the US sets monetary policy for its
you to the international currency with complete disregard for the interests of
Bratislava Schools Debating
dollarized countries.
Competition. The tournament
will take place from 7th to 11th It is likely that the US will eventually share the benefits Dollarized countries lose "Seigniorage benefits".
April 2011 in Slovakia’s capital
of seigniorage. An International Monetary Stability Act Issuing money means gains to the central bank,
city (yep, you guessed it)
proposing this has been debated in the US and because you can buy goods with a new note but it
Bratislava.
although not passed, is still an issue of strong debate. does not cost much to produce it. These gains form
More about this event
Some future compromise is likely. In any case, the part of government revenue. They can be significant:
benefits of seignorage are small compared to the 9% of the Brazilian government budget comes from
benefits of dollarization. seigniorage. These gains are transferred to the US
under dollarization.

Stabilising the exchange rate against the dollar means Further economic integration with the United States
that the risks of trading between the countries are may not be a good thing. Countries will become
reduced, and trade with the US will increase. This, in dependent on the good-will of US trade policies. This

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Dollarization: Debatabase - Debate Topics and Debate Motions

turn, promotes economic growth. is not worth the sacrifices. They will also be vulnerable
HWS / IDEA Round Robin to being outcompeted in export markerts by countries
In the HWS / IDEA round who have retained their own currency, which may well
robin the International Debate devalue over time relative to the dollar, making their
Education Association and exports relatively cheaper.
Hobart and William Smith
Colleges are bringing together Countries currently operating some sort of fixed Without an independent central bank, countries have
an elite and internationally exchange rate (as many developing countries do) no "lender of last resort" to rescue banks if there is a
diverse group of debaters and cannot operate as lenders of last resort anyway. A banking crisis. This means people will have less faith
adjudicators for a weekend of lack of lender of last resort functions can in fact in the banking system, and that any banking crisis will
debate at the highest level.
promote a stronger, healthier banking system, and be disastrous.
More about this event helps prevent the kind of "crony capitalism" that
bedevilled South East Asia. Banks cannot take on
risky loans, relying on the central bank to bail them
out if necessary.

Motions
This House would dollarize.
This House prefers the greenback.
IDEA Exchange 2011 – Vilnius This House believes a national currency is not worth it.
15-17th April! This House believes it is time South America accepted the dollar.
If you are interested in making This House believes the government can’t be trusted to run the economy.
a positive change in your
community, if you are working
or volunteering for the Useful Sites
promotion of the values of an Home page of Schuler (pro-dollarization economist)
open society, if you are
IMF article
interested in debate –
competitive and non- Cato Institute paper
competitive, if you would like IMF Conference transcript
to meet other
Economic Review paper
More about this event
Paper on the dollarization debate in Mexico
Philippine Institute of Development Studies paper

Useful Books
The Dollar Hegemony: Dollar, Dollarization, and Progress
By: Jean Gabriel
Estonian Debating Society The Euro, Capital Markets and Dollarization
and IDEA join forces to By: Edward B. Flowers
organize Estonia Open 2011!
Dollarization: Debates and Policy Alternatives
Estonian Open 2011 will be By: Eduardo Yeyati
held in British Parliamentary
Dolarización: Argentina en la Aldea Global
Style: 5 preliminary rounds
By: Gabriel Rubinstein
with 5-minute speeches,
followed by semi-finals and The Dollarization Debate
Grand Final with 7-minute By: James W Dean (Editor), , Thomas Willett (Editor)
speeches. Team cap for the Editor: Dominick Salvatore
tournament is 36 and N-1
judging rule applies for the
teams. Chi Themes
More about this event Politics and Economics

Discuss
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Author Post

Debatabase Posted: Wed Dec 20, 2006 12:08 pm

Member
Author: Sarah Monroe (United Kingdom) Sarah is a student at Oxford university,
studying economics. She was captain of the English World Schools team in 2000 and
is now an experienced university debater and judge. Created: Saturday, January 04,
2003 View Topic Official dollarization involves a country abandoning an independent
currency. In dollarized countries, only a foreign currency is legal tender (though local
coins may be produced). Dollarization usually involves the US dollar, but may
increasingly refer to conversion to other currencies such as the Euro. Panama,
Ecuador and El Salvador are all currently "dollarized", as are many small countries
including East Timor, and dollarization was seriously suggested as a solution to
Argentina's recent crisis. Dollarization is different from monetary union because the
US continues to set monetary policy in its own interest alone, whereas the European
Central Bank (for example) is required to take all Eurozone countries' interests into
account.

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Dollarization: Debatabase - Debate Topics and Debate Motions

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