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Room MMB 140, New Cross London SE14 6NW
3 Feb 2020 5 p.m. – 6:45 p.m.
A New Keynesian-Kaleckian Perspective on Dollarization
What does "dollarization" mean in a world of endogenous money, i.e. a world where money is not (only) created by printing pieces of paper, but (mainly) by making loans? Is it true that dollarization only constitutes a limitation of sovereignty in the short run (making it harder to run standard stabilization macro policies) or can it slow the growth process of a country? The paper builds a theoretical, Keynesian-Kaleckian growth model for a dollarized economy in a framework of endogenous money to answer these questions. We will show that, ceteris paribus, the steady-state medium-term growth rate of a dollarized economy is lower than that of a country with its own currency. We will also show that a dollarized economy is more likely to be unstable than an economy with its own currency, in the specific sense that, everything else being equal, it is more likely for a dollarized economy to fall into a debt trap.
Marco Missaglia is Associate Professor of International Macroeconomics at the University of Pavia, Italy. He spent some years teaching in Colombia (Universidad Nacional de Colombia) and Ecuador (FLACSO), where he had the opportunity to strengthen his interests in the field of Macroeconomics for Development. His approach to macroeconomics belongs to the post-Keynesian tradition.
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