Research Paper on:
Panama and Dollarization

Unformatted Sample Text from the Research Paper:
where this foreign currency is merely the preferred for of currency and it held by many individuals. The practice of dollerization has been occurring for many years in many countries.  Panama has been using the US dollar as official currency for nearly one hundred years (Frankel, 2000) and more recently Ecuador has considered adopting the currency (Mack, 1999), and adopted  full dollerization in 2000 (Frankel, 2000). In reality this means that the relationship that Panama, or any other country with the US dollar as its currency, has with New  York economically will be somewhat the same as any outlying state such as Texas or Florida (Mack, 1999). To understand the impact and why it was adopted there  is a need to consider the general criteria for dollerization. The ability to become part of an optimum currency area may be seen as a part of the criteria that  Panama matched, they have a relatively small economy, that is open, there have been dominant internal shocks, this alone would explain the use of dollerization in Panama. However, when it  is also considered against the more modern criteria that are seen as the aims of stabilisation and increasing investors confidence, as seen with the convertibility plan in Argentina in 1991  (Frankel, 2000). The need to import foreign currency, an already existing wide scale use of the currency, the desire for closer trading ties wit the US and access to  adequate levels of the reserves were all seen with Argentina. And ay also be applied to Panama. With this is can be seen why Panama adopted dollerization under both old  and new criteria (Frankel, 2000). However, this does not tell us the effects on he county, only the way in which it changes some of the volatility and structure of