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Global forex pros sroA world currency – Pros and cons and can it become a reality. In one of my previous articles on an economic and monetary union, we had discussed the possibility of the Eurodollar becoming a future world currency. Let’s explore this fanciful idea further and reason out the pros and cons of such a currency and what experts have really proposed. To begin with a world currency and a local currency may be viewed as two opposite ends of the currency spectrum. The Euro may be seen as a currency that is somewhere in the middle as it was formed by uniting a number of local currencies. The concept of pegging local currencies to the US dollar, the Euro, Pound Sterling or any other currency also indicates that these local currencies are in reality a shadow of their parent currencies. These currencies can virtually be replaced by the currency they are pegged to. Going by this line of argument, the world of currencies may actually be a much smaller place than it appears, making the leap towards a world currency a bit shorter. In fact the US dollar and to some extent the Euro are representative of world currencies as nearly 65% of global central bank reserves are held in US dollars, while around 25% are in euros. Nearly 60% of international financial transactions are denominated in US dollars, making it a global medium of exchange. The emergence of the Euro since 1999 has given the US dollar tough competition. It has been estimated that since early 2007 the value of Euro notes in circulation has risen to over € 600 billion, making it the currency with highest value of cash in circulation in the world!

Economists have proposed several variants of a world currency like the Terra, digital gold currency backed by gold, the Eurodollar formed by the union of the Euro and the dollar, extension of SDRs or the IMF backed currency called Special Drawing Rights. The formation of any such currency would have to be backed by a supreme Central Bank. The Terra is one such world currency that was proposed by the Belgian economist Bernard A. Lietaer. The Terra was to be based on a basket of 12 key commodities that could be considered essential for today’s world. These include, 30% gold, 2 kg grain, 200 g meat, 1 L wine, 3 kg steel, 200 g cotton wool, 200 g copper, 10 kWh of electricity and half an hour of labour. The Terra was expected to be a currency that would be free from inflation. Benefits of a single world currency A single world currency could bring with it substantial benefits such as: Elimination of transaction costs related to trading currencies Do away with the need of maintaining forex reserves Do away with currency risk, benefiting foreign investors Eliminate the chance of currency failure, which would make foreign investment decisions much easier in emerging economies Such a currency would in one go eliminate the problem of current account deficits as there would be no need for foreign exchange. While, the benefits seem immense, such a currency could virtually do away with the need for forex trading!! But, forex traders can relax for now as the adoption of such a currency is not a likelihood in the near future due to the vast variations in global political and economic structures. Some of the key reasons that go against a single currency include: Loss of national monetary policy – A single currency would imply a single interest rate. Thus, a region or nation experiencing economic depression will be unable to use the interest rate lever to boost the economy. Similarly a country with high inflation will be unable to independently raise interest rates to contain inflation.

Moreover, Islamic countries, which form a large part of the geography, do not believe in interest rates!! Political barriers – Political differences between nations make it extremely difficult for them to adopt a common currency. It can lead to a loss in political sovereignty as monetary interests would need to surpass political interests. This is unlikely to be acceptable to most of the nations and the idea of a single currency may be difficult to implement. Global forex pros, s. r. o. zrusena (Historicky nazov: Atyl, s. r. o.) - Obchodny register. Udaje z Obchodneho registra spolocnosti Global forex pros, s. r. o. zrusena Nazov Global forex pros, s. r. o. zrusena ICO 47919485 DIC 2024153846 Sidlo Michalska 38612, 811 01 Bratislava Datum vzniku 29. oktobra 2014, Zapisana na Bratislava I, odd. Sro, vl. c.101017B. Zakladne imanie Podla uctovnej zavierky: 5 000 € Historicky nazov Atyl, s. r. o. (platne do 11. novembra 2014 ) Historicke sidlo Smolenicka 31353, 851 05 Bratislava (platne do 11. novembra 2014) Setrite cas a pracujte s podaniami z Obchodneho registra hromadne s FinStat Premium. Pridajte si do monitoringu neobmedzeny pocet firiem automaticky dostanete emailovu notifikaciu o kazdom novom podani, nemusite tak rucne kontrolovat kazdu firmu zvlast Vyhladavajte, filtrujte a exportujte podania sledovanych firiem vo Vasom konte na casovej osi chronologicky zoradene udalosti obchodnych partnerov s moznostou vyhladavania, filtrovania a exportu udalosti firiem do CSV Exportujte vzdy aktualne udaje o vasich obchodnych partneroch do Excelu aktualne nazvy, adresy a SK NACE spolocnosti, mena a adresy statutarov spolu s financnymi udajmi ziskate v jednom CSV subore. Datum vymazu 28.aprila 2016 Dovod vymazu dobrovolny vymaz Spolocnost zrusena od 20. januara 2016 Pravny dovod zrusenia Rozhodnutim spolocnikov o zruseni obchodnej spolocnosti podla § 68 ods.3 pism. b) Obchodneho zakonnika. Pravny nastupca Spolocnost zanikla v dosledku zlucenia Remeda s. r.o.44586647 Magurska 37, 974 11 Banska Bystrica. Uplne znenie ZL. zep Rozhodnutie (Atyl).zep Podpisovy vzor.

zep. Spolocenska zmluva alebo zakladatelska listina. zep Listina, ktorou sa preukazuje podnikatelske opravnenie na vykonavanie cinnosti, ktora sa ma do obchodneho registra zapisat ako predmet podnikania. zep Pisomne vyhlasenie spravcu vkladu podla osobitneho zakona, 2).zep Podpisovy vzor (Atyl).zep. notarska zapisnica N 22732015, rozhodnutie jedineho spolocnika, zapisnica, spolocenska zmluva, plnomocenstvo plnomocenstvo 1.zep navrh zmluvy o zluceni. zep notarska zapisnica. zep N 21812015 spolocenska zmluva, zapisnica, rozhodnutie jedineho spolocnika, plnomocenstvo plnomocenstvo 1.zep notarska zapisnica N 22692015, plnomocenstvo navrh zmluvy o zluceni, zapisnica, rozhodnutie jedineho spolocnika, plnomocenstvo plnomocenstvo 1.zep zapisnica z VZ. zep notarska zapisnica. zep N 1312016 plnomocenstvo. zep notarska zapisnica N 23012015, navrh zmluvy o zluceni, spolocenska zmluvy, zapisnica, rozhodnutie jedineho spolocnika, plnomocenstvo plnomocenstvo 1.zep. Rozhodnutie jedineho spolocnika. zep Zakladatelska listina. zep Podpisovy vzor konatela a suhlas s menovanim.

zep notarska zapisnica. zep N 9342015 plnomocenstvo 1.zep zakladatelska listina-08.10.2015, navrh zmluvy o zluceni-Pomida Rent sro. a Global forex pres sro., rozhodnutie jedineho spolocnika, plnomocenstvo rozhodnutie jedineho spolocnika, plnomocenstvo notarska zapisnica. zep N 9822015 zakladatelska listina. zep plnomocenstvo 1.zep navrh zmluvy o zluceni, spolocenska zmluva, zapisnice, plnomocenstva notarska zapisnica. zep N 11792015 plnomocenstvo 1.zep notarska zapisnica. zep N 11852015 navrh zmluvy o zluceni, spolocenska zmluvy, rozhodnutie spolocnika, zapisnica, plnomocenstvo plnomocenstvo 1.zep spolocenska zmluva, rozhodnutie jedineho spolocnika, zapisnica, plnomocenstvo notarska zapisnica. zep N 21512015 plnomocenstvo 1.zep notarska zapisnica. zep N 21772015 rozhodnutie jedineho spolocnika, zapisnica, spolocenska zmluva, plnomocenstvo plnomocenstvo 1.zep notarska zapisnica N 22202015, spolocenska zmluva, rozhodnutie jedineho spolocnika, zapisnica, plnomocenstvo navrh zmluvy o zluceni. zep plnomocenstvo 1.zep spolocenska zmluva, zapisnica. Zaregistrovali sme zmenu osob: Nove osoby NiNel s. r. o. (Zlucenie) , Slnecna 34522, 956 22 Prasice LOYAL GROUP, s. r.o. (Zlucenie) , Strazna 9, 831 01 Bratislava - mestska cast Nove Mesto VERAM s. r.o. (Zlucenie) , Styndlova 13, 821 05 Bratislava - mestska cast Ruzinov Stavebniny KUBO s. r.o. (Zlucenie) , Druzstevna 511, 027 43 Nizna. Zaregistrovali sme zmenu osob: Nove osoby Cristian Trifa (Spolocnik, Konatel) s vyskou vkladu: 4 000 € , Str. Labirint nr. 16 sc. A ap.11, Timisoara, Rumunsko Zrusene osoby Dusan Pokorny (Spolocnik, Konatel) s vyskou vkladu: 4 000 € , Pricni 12922, 602 00 Brno, Ceska republika. How much actual money is there in the world? The concept of a single worldwide currency has been suggested since the 16th century, and came close to being instituted after World War II -- yet the idea remains little more than that. Proponents argue that a universal currency would mean an end to currency crises like Zimbabwe's. A single currency wouldn't be subject to exchange rate fluctuations because there would be no competing currencies to exchange against. In other words, a universal currency would lose its value as a commodity bought and sold on open markets and would have value only for its worth in buying other commodities.

To put it plainly, money would become just money. Its purchasing power would be the result of the adjustment of interest rates and other monetary policy tools in response to inflation or deflation. Who would be responsible for adjusting those interest rates, though? One of the chief fears among opponents of a universal currency is the creation of a central body formed to oversee the monetary policy for a single world currency. An extant international body, the United Nations (U. N.), provides an example of the potential pitfalls and strength a central global monetary body could expect. Successes like peace-building missions in nations as disparate as El Salvador, Mozambique and the former Yugoslavia attest to the power a unified international body can have to resolve conflict. On the other side of the coin, the U. N.'s Intergovernmental Panel on Climate Change (IPCC) is widely accused of replacing science with diplomacy, as nations responsible for contributing to climate change aren't openly taken to task in IPCC reports. These reasons and others continue to prevent the adoption of a universal currency. Perhaps closer on the horizon is the integration of separate currencies within regions into unified currencies. This has already occurred in some areas. The most famous example is the euro. As of 2013, 17 countries in Europe use the euro instead of their local currencies. Some the benefits touted include stimulation in trade activities and a reduction in transaction costs and fluctuation risks as member countries no longer need to exchange currencies when doing business with each other.

Tourists also don't have to switch currencies when they travel either sources: Currency Solutions, European Commission. At the same time, there are significant disadvantages. For instance, a debt-laden country is no longer able to devalue its own currency to make its goods more attractive to buyers from other countries. The financial troubles of countries like Greece and Spain in the 2010s have been exacerbated, some experts say, by the fact that they use the euro sources: Schoen, Currency Solutions. The euro is not the only example of a shared currency. Eight West African nations share a common currency, the West African CFA franc (CFA stands for Communaut© Financire d'Afrique or African Financial Community), which was introduced in 1945. A further six Central African countries use the Central African CFA franc, though the two currencies are interchangeable source: Miller and Bouhan. In 2008, Central American nations agreed to create a single currency for the region, but as of 2013 it has not happened source: Central America Data. Meanwhile, the Union of South American Countries put the brakes on their own common currency project in 2011, citing the experiences it observed with the European Union and the euro source: MercoPress. So while the debate over regional and universal currencies continues, people like Mike Hewitt will have to count money the old-fashioned way. Please complete the security check to access globalinvestoralerts. org. Why do I have to complete a CAPTCHA? Completing the CAPTCHA proves you are a human and gives you temporary access to the web property.

What can I do to prevent this in the future? If you are on a personal connection, like at home, you can run an anti-virus scan on your device to make sure it is not infected with malware. If you are at an office or shared network, you can ask the network administrator to run a scan across the network looking for misconfigured or infected devices. Cloudflare Ray ID: 45072889d2978261 • Your IP : 193.0.218.8 • Performance & security by Cloudflare. CFD Global is one of the Cyprus-based, CySEC-regulated brokerages which have whipped their operations into shape in the post binary options-era. The brokerage features Forex and CFDs, with good trading conditions – and yes, that includes cryptocurrencies as well. The operation offers a web trader as well as MT5 – the latest iteration of the world’s best and most popular online trading platform. The corporate entity behind CFD Global is Key Way Investments Ltd, based at 2 Sofouli Street, Chanteclair Building, 6th Floor, Office 602, Nicosia, Cyprus. As said above, the operation is licensed by CySEC. Its license number is 29216. In addition to being registered with and licensed by CySEC, CFD Global is also registered with a number of national regulatory bodies, among them the UK’s FCA, Poland’s KNF and Germany’s BaFIN. Long story short, being MiFID compliant, the brokerage can operate all over the EEA (European Economic Area). Being considered a Cyprus Investment Firm, Key Way Investments Ltd offers its users membership in the Investor Compensation Fund, which essentially means that if the brokerage goes under for whatever reason, the ICF will compensate those who have funds invested with the operation. The brokerage has made a whole suite of downloadable documents available to users at its site, so every detail of this scheme can be explored and studied. The brokerage promises its clients the best available execution and to this end, it has worked out a set of rules, which are also published at the website. Long story short: these documents may seem excessive and boring even, but it is recommended that you – a prospective client of the brokerage – read them all, so you understand exactly what you’re dealing with here.

In this regard, special attention should be paid to the Risk Disclosure Statement, which details all the risks associated with the trading activity. CFD Global’s Trading Products. Forex is obviously the main product category featured by CFD Global. The brokerage’s take on the world’s most liquid market features 55 currency pairs, from majors to minors and all the way down to exotics. The trading action is on 24 hours a day, 5 days a week (with the obvious exception of the weekends), there are no commissions and the spreads are said to be extremely tight. The maximum available leverage on Forex pairs is 300:1. The commodities section is mostly about precious metals, such as Gold and Silver. The trading conditions are outstanding on this asset class as well. The margin requirements are low and the maximum available leverage is 200:1 – slightly less generous than with Forex, though this means traders’ exposure to risk is somewhat limited as well. The indices section gives traders access to more than 26 global indices, covering most of the global economy. The spreads and the margin requirements are tight on this asset-class as well. The leverage is only 200:1 on indices too. The stocks section is wildly diverse. More than 2,000 underlying assets are available in this category, covering 20 major markets. The maximum available leverage in this category is 10:1. Bonds come with attractive premiums and the selection featured by CFD Global covers the US, Japan as well as Europe.

The maximum available leverage in this instance is 100:1. The cryptocurrency selection is perhaps the most interesting to those involved in this vertical. The brokerage supports a surprisingly wide range of currencies, starting with Bitcoin and Ethereum, and wrapping up with Dash, Litecoin, Ethereum Classic, Bitcoin Cash and Ripple. Several pairings are offered on all these currencies, covering the USD as well as the EUR. The maximum leverage on these products is the smallest at the brokerage, and the trading conditions are somewhat adverse too, by comparison with the above-mentioned asset categories. All that is understandable though: the extreme volatility of these underlying assets adds quite a bit of risk to the equation, for the broker too. What traders need to understand about crypto (and the other CFD-based assets offered by the broker) is that they will never be able to purchase and to possess such assets at the site. What they will be trading is the difference between the entry and exit prices of the contracts: a financial derivative, and not the actual asset. CFD Global Trading Platforms. In this regard, the diversity of the CFD Global offer is not particularly impressive: only two platforms are featured, though they do cover all the desktop and mobile devices users may bring to bear. Advertised as all-in-one trading technology, MT5 is indeed the most complete trading solution currently available. It can be downloaded directly from the CFD Global website, free of charge.

Installation only takes a few seconds too. The trading interface featured by MT5 is indeed highly intuitive, offering multiple windows and asset-control panels for the proper monitoring of one’s entire trading activity. In addition to that, the platform is also highly customizable. Traders are free to create and to save their chart templates for later use. Some 30 indicators are already built into the platform, and more than 2,000 additional ones can be added. These indicators are custom ones and they are indeed available for free. The automation capabilities of the MT5 platform are second to none. Trading signals can be applied, EAs can be coded and used, tick charts can be embedded, and alerts can be set up on trading positions. In addition to Windows computers, MT5 works on Android and iOS-based mobile devices too. The CFD Global Web Trader is designed to allow traders to access the markets from anywhere, at any time. The Web Trader is certainly not short on trading tools such as indicators. In fact, it features some 90 such indicators, which can all be configured by the user. Some 3 chart-types are available, among them candlesticks, and live, on-platform market news are delivered for that all-important fundamental analysis. Needless to say, the Web Trader is compatible with all the major browsers out there, whether run from a Windows Desktop, or an Android - or iOS mobile device.

In addition to allowing its users to perform a “Trading Experience Test”, CFD Global also features a Demo Account. Now then, some of the questions that are asked of users upon the opening of such an account are beyond every imaginable limit privacy-wise, and we’re not at all sure whether they are indeed necessary. The Demo account is available for both supported platforms. The CFD Global Essential account requires a minimum deposit of $1,000. For that money, traders gain access to the whole trading package, with the exception of full-time support and trading analysis. CFD Global Original ups the stakes to $5,000 minimum deposit-wise. Event analysis and trading alerts are included in this package, in addition to everything the Essential account delivers. CFD Global Signature is for high-volume traders, who can afford to make a deposit of at least $25,000. This account obviously delivers all the perks one could possibly need, including round-the-clock support. CFD Global offers good trading platforms, an outstanding product selection and a decent regulatory profile. A CySEC license may not be the most prestigious in the business, but it does attest to the broker’s MiFID compliance. Please be advised that certain products andor multiplier levels may not be available for traders from EEA countries due to legal restrictions. 118 051 . the front page of the internet. and subscribe to one of thousands of communities. 9 deleted Want to add to the discussion? – deleted 2 3 4 9 * (1 ) –dnew 13 0 Answer Link 12 13 14 9 (16 ) – deleted 2 3 4 9 (4 ) – deleted 0 1 2 9 (0 ) –greenw40 1 2 3 9 (0 ) –Zoomerdog -1 0 1 9 (8 ) – deleted 2 3 4 9 (6 ) – deleted 4 5 6 9 * (4 ) – deleted -3 -2 -1 9 (2 ) – deleted 2 3 4 9 * (1 ) – deleted -3 -2 -1 9 (0 ) –anon36 -1 0 1 9 (0 ) – deleted 2 0 Answer Link 1 2 3 9 (0 ) – deleted 0 1 2 9 * (0 ) –anon36 1 0 Answer Link 0 1 2 9 * (0 ) – deleted 1 0 Answer Link 0 1 2 9 (1 ) –scoops22 0 1 2 9 (0 ) –tamrix 0 1 2 9 * (0 ) – deleted 0 1 2 9 (0 ) – deleted -1 0 Answer Link -2 -1 0 9 (0 ) – deleted 0 1 2 9 (0 ) Reddit for iPhone Reddit for Android mobile website.

, . © 2018 reddit . . REDDIT and the ALIEN Logo are registered trademarks of reddit inc. ? Rendered by PID 6731 on r2-app-0099a6cbb71fbac72 at 2018-08-26 14:58:45.713481+00:00 running b1939d2 country code: UA. global currency pros and cons. China's Global Currency Expansion Bringing More Yuan Denominated Products to Market. By Kerri Shannon , Associate Editor , Money Morning - January 25, 2011. China's Global Currency Expansion Bringing More Yuan Denominated Products to Market. By Kerri Shannon , Associate Editor , Money Morning - January 25, 2011. Start the conversation. Chinese regulators plan on developing more yuan-denominated products and allowing more offshore yuan investment opportunities in the continued push for the global expansion of China's currency. More yuan-denominated bonds, foreign direct investment (FDI) opportunities and eventually initial public offerings (IPOs) will hit the markets in coming years as China gradually allows its currency, also called the renminbi, to be more accessible in international trade and investment. Chinese regulators also want to support international development of Chinese entities. The People's Bank of China (PBOC) earlier this month announced that it has started looking into permitting Chinese companies with overseas yuan accounts to engage in FDI in the mainland. The central bank also recently said it would allow mainland companies to conduct overseas direct investments (ODI) with the yuan. Czech Republic Company Formation.

Our full services. Czech Republic company formation. Bank accounts & Payments. Procedures and documentation. Assistance with all needs. Our experience has turned GBO into a leading provider in assisting with setting up a limited company in Czech Republic. for price offer for Czech Republic company formation. Company Formation in the Czech Republic. Foreign entities are permitted to set up companies in the Czech Republic and the country offers several types of registration options each with its own requirements and regulations. Company registration in the Czech Republic is a popular option and attracts many international businesses. The Czech Republic offers foreign companies a highly educated and professional work force; a solid infrastructure; low maintenance costs and many more advantages. The Czech Republic joined the EU in 2004 and since then has developed a solid business community and infrastructure that welcomes foreign companies and investors by making company registration in the Czech Republic a smooth, low-cost process with minimum requirements. The Czech Republic Company Register authorizes the registration of four different types of company: (SRO) Limited Liability Co. (AS) Joint Stock Co. Branch Office Partnership. Czech Limited Liability Company (SRO) SRO (Czech limited liability Company) is one of the most attractive forms of Czech company available partly because the formation and operation of a limited liability company in Czech is not expensive.

It requires only CZK1 (about 5 euro cents) as the registered company’s minimum capital. This kind of company is favored by small to medium companies because the company can be registered by one person or unlimited number of people. However an existing SRO with a sole shareholder cannot set up another SRO or become the only shareholder of another SRO company. To register a new SRO company in the Czech Republic you must be registered with the Trade License Office. To register with the Czech TLO you will need to provide the statutory document for companies not yet registered with the Commercial Register or the excerpt from the Register showing that your company is an already established business (for example your lease and proof of payment for the administrative fee.) Features of a Czech-registered Limited Liability Company (SRO) The company must hav at least CZK 200,000 (about €6,500) in share capital with a minimum of 50% paid up. Each company shareholder must contribute a minimum of at least CZK 20,000 (about €650). A person may not be the sole shareholder in more than three SRO companies. There must be a reserve fund created from the profits of the SRO and built up to 10% of the SRO’s registered capital. Advantages of registering a Limited Liability Company (SRO) in the Czech Republic. A SRO is the easiest Czech company to establish with minimum requirements. A SRO company is the most cost-efficient Czech company to establish. SRO companies have a transparent ownership structure. A Czech SRO company requires only one executive. Czech Republic Joint Stock Company (AS) A Czech Republic Joint Stock Company requires a minimum share capital of CZK 2 million (about €65,000) or if the share capital is achieved via a public offering then the minimum share capital is CZK 20 million (about €700,000). With a Czech registered Joint Stock Company 30% of the share capital must be paid up. There is a two-tier system with supervisory and management boards.

The company must create a reserve fund from the profits to be built up to 20% of the registered capital. Czech Registered Branch Office. A Czech registered Branch Office is considered part of a foreign parent company and not as a separate legal entity. The Czech branch must be registered with the Trade License Office prior to its registration with the Czech company register. The branch manager can be of any nationality – Czech, EU or foreign national. However no matter the nationality of the branch management the company’s accounting records must be presented in the Czech language and in accordance with Czech law. The Czech Public Register. The Czech Public Register holds records of statutory information relating to legal entities governed by private law. The regulations covering the Czech Public Register are set out in Act # 892012, Section 120 of the Civil Code. Take Advantage of all the Opportunities the Czech Republic Offers New Businesses. If you want to take advantage of the amazing business opportunities available in the Czech Republic we can help you with company registration in Czech Republic. We can assist you in finding Czech Republic Shelf Companies and even ready-made Czech companies that are for sale. Alternatively we can also guide you through the entire process of company formation in Czech Republic and establishing a new Czech company. Global forex pros sro. ©2000 International Monetary Fund December 2000.

The Economic Issues Series aims to make available to a broad readership of nonspecialists some of the economic research being produced on topical issues by the International Monetary Fund. The series draws mainly from IMF Working Papers, technical papers produced by IMF staff members and visiting scholars, as well as from policy-related research papers. The following paper draws on material originally contained in IMF Working Papers 0050 and 0029, respectively, "The Pros and Cons of Full Dollarization" and "The Choice of Exchange Rate Regime and Monetary Target in Highly Dollarized Economies," both by Andrew Berg and Eduardo Borensztein. Readers may purchase these papers for $10 each from IMF Publication Services. Charles S. Gardner prepared this version. The Pros and Cons of Full Dollarization. S ince the end of the Bretton Woods system of fixed exchange rates nearly thirty years ago, the old dilemma facing countries of finding workable currency exchange arrangements has become more challenging, and the choices have become more varied. The decision about which exchange rate system to adopt has become more difficult as world trade and capital markets have become more integrated. New problems have emerged, and with them, new answers to the question of the best exchange regime to promote each country's development objectives. The newest of these solutions is full dollarization, under which a country officially abandons its own currency and adopts a more stable currency of another country—most commonly the U. S. dollar—as its legal tender. From the perspective of any hard currency country, full dollarization may appear more radical than it is: use of the U. S. dollar or another major currency is pervasive to one degree or another in most developing countries, particularly in financial contracts (see Box 1, "What Is Dollarization?"). Full dollarization means taking the next step, from informal, limited dollarization to full, official use of the foreign currency in all transactions. The main attraction of full dollarization is the elimination of the risk of a sudden, sharp devaluation of the country's exchange rate.

This may allow the country to reduce the risk premium attached to its international borrowing. Dollarized economies could enjoy a higher level of confidence among international investors, lower interest rate spreads on their international borrowing, reduced fiscal costs, and more investment and growth. This pamphlet focuses on full dollarization, or one country officially adopting the currency of another for all financial transactions, except perhaps the need for coins. In considering this choice of exchange regime, two points are important to keep in mind: The term dollarization is shorthand for the use of any foreign currency by another country. The issues it raises are identical for the other countries in the region using the South African rand , for example, and they would be for any country of, say, Eastern Europe, considering eventually adopting the euro. Most developing countries—as well as transitional economies just adopting market mechanisms—already have a limited, unofficial form of dollarization. To a greater or lesser degree, their residents already hold foreign currency and foreign currency-denominated deposits at domestic banks. In high inflation countries, dollars or some other hard currency may be in widespread use in daily transactions, alongside the local currency. Such informal dollarization is a response to economic instability and high inflation, and the desire of residents to diversify and protect their assets from the risks of devaluation of their own currencies. It is useful to distinguish between two motives for the demand for foreign currency assets: currency substitution and asset substitution . In currency substitution foreign assets are used as money, essentially as means of payment and unit of account, and it typically arises under conditions of high inflation or hyperinflation when the high cost of using domestic currency for transactions prompts the public to look for available alternatives. Once the use of foreign currency in transactions becomes accepted, it may not be rapidly abandoned. Remarkably, the increase in dollarization in some Latin American and Asian countries has continued and accelerated in recent years even following successful stabilization. Asset substitution results from risk and return considerations about domestic and foreign assets. Historically, foreign currency-denominated assets have provided the opportunity of insuring against macroeconomic risks, such as price instability and prolonged depressions in many developing countries.

Even under conditions of current stability, foreign currency-denominated assets may still serve this purpose if residents believe there is even a small chance of inflationary relapse. Important differences exist between informal and full dollarization, presenting transitional problems for governments considering it. All government and private debt under full dollarization is denominated in dollars, and both public and private accounts must be converted to dollars. To make the conversion, countries must set the rate at which old debts, contracts, and financial assets will be converted to dollars. Finally, the stability promised by dollarization is itself relative, given that the U. S. dollar—or any other hard currency chosen for use by another country—will fluctuate in value against other widely-traded currencies. During the post-Bretton Woods period, these swings have sometimes been large. Questions About Pegs. Can these advantages offset the costs of a country giving up its own currency? The answers are complex, and in the end turn on each country's specific circumstances. But more and more countries are seriously considering full dollarization as they deal with the changes in the world economy, particularly over the past 20 years. During the inflation-plagued 1980s, much of the debate over exchange regimes for developing countries centered on the role of exchange rate "pegs". Countries generally pick from a range of possibilities, including tying their currencies to baskets of other currencies (such as those of their trading partners), indexing their currencies in some way to their own inflation rates, or even banding together in groups, as many French-speaking African nations have through currency unions tied to the French franc.

In the 1990s, global inflation abated and capital mobility and the scale of capital flows increased sharply. While countries welcomed the investment flows, they faced a new threat, as speculative attacks rose in frequency and severity against currencies that capital markets viewed as vulnerable to devaluation. Generally, the victims of these currency crises were maintaining some sort of pegged exchange rate regime. Consequently, the belief began to emerge that in a world of high capital mobility, exchange rate pegs might themselves attract speculative attacks and that only extreme choices, such as a free float or a currency board were viable. The currency board regime, under which the domestic currency is fully backed by international reserves, is the strongest form of pegged exchange rate option. Advocates of full dollarization attack both of these choices. Free floats, they argue, are not viable for many developing countries because they risk excessive exchange rate volatility. So far, only the largest developing economies, with relatively advanced financial systems, such as Korea, Brazil, and Mexico, have attempted floating. While experience is limited, these experiments have worked thus far without major disruption. Meanwhile, currency boards have fallen prey to costly speculative attacks.

Argentina and Hong Kong SAR 1 , using currency boards successfully, nonetheless suffered sharp increases in interest rates and recessions in recent years as speculative attacks spread to them from other countries. The Appeal of Dollarization. Against this background, then-president Carlos Menem of Argentina suggested in 1999 that Argentina adopt the U. S. dollar as the ultimate solution to its long history of difficulties with monetary and exchange rate policy. In January 2000, Ecuador, in the context of a deep economic and political crisis, adopted the U. S. dollar as its legal tender. Prominent economists have begun to argue that essentially all developing countries should dollarize, and some industrial countries have even been urged to consider it. Partly prompted by the example of European countries giving up their currencies for the euro, some have suggested that Canada should adopt the U. S. dollar as the North American Free Trade Agreement (NAFTA) evolves. Weighing the pros and cons of full dollarization is complicated by the virtual absence of historical experiences. Panama is the only sizable country with a history of using a foreign currency—the U. S. dollar—as legal tender, and it is fairly small, and has very close historical, political, and economic links to the United States. Even if there were more country experiences to assess, they would have to be over longer periods than is usual for evaluating monetary and exchange rate options. That is because dollarization is nearly permanent, and some of its benefits can be gained only in the long run. This analysis of full dollarization compares it to its nearest competitor, the currency board. This comparison captures the main implications of dollarization and how its effects differ from those of simply adopting a very firm peg. Furthermore, if the costs and benefits of a currency board turn out to be at least equivalent to dollarization, a currency board would be a simpler and preferable alternative for a country seeking a firmly pegged exchange regime. The differences between currency boards and dollarization are few, but important. Dollarization's key distinguishing feature is that it is permanent, or nearly so. Reversing dollarization is much more difficult than modifying or abandoning a currency board arrangement. In fact, the largest benefits claimed from dollarization derive from the credibility it carries precisely because it is nearly irreversible.

And yet for some countries under particular circumstances, the irreversibility could come at a very high cost. A government adopting full dollarization gives up the revenue from the loss of seigniorage (see Box 2, What Is Seigniorage?), whereas a currency board country does not. But a dollarizing country, by completely eliminating the risk of currency devaluation, gains lower interest rates on foreign borrowing. The analysis below examines these issues in more detail. Quantifying the potential savings from lower interest rates turns out to be more complex than it first appears, but the cost of seigniorage loss can be roughly estimated. Important effects on economic stability and global financial integration resist quantification. Giving up any possibility of devaluation is costly for some countries, negligible for others. And all must consider the implications of a reduced national role in providing lender of last resort facilities and backing for their banking systems. Is dollarization, then, a better exchange rate regime, especially for developing countries? The answer for each country depends ultimately on its own unique characteristics, but a closer look at the pros and cons of dollarization offers some general guidance. Box 2. What Is Seigniorage? The ancient concept of seigniorage as a government's profit from issuing coinage that costs less to mint than its face value is essentially the same with paper currencies: abstracting from the minor cost of printing paper money, seigniorage is simply the increase in the volume of domestic currency. Currency can be thought of as non-interest bearing debt, and the ability to issue it as a source of revenue for the monetary authorities.

In addition, reserve requirements on banks may also be non-interest bearing (or be remunerated well below market rates levels) and thus contribute to seigniorage. Thus, the annual flow of seigniorage is frequently measured as the increase in base money (the sum of currency plus bank reserves). As counterpart of the issuance of currency, the central bank acquires assets that do pay interest, such as foreign currency reserves, government securities, and loans to private banks. In a currency board system, for example, the central bank must acquire foreign reserves in an amount equal to the domestic currency issue. As a result of issuing non-interest bearing debt (currency) and holding interest-earning assets (foreign reserves, etc.) the central bank earns a gross profit, which is often also called seigniorage by central banks. The Risk Premium. An immediate benefit from eliminating the risk of devaluation is reducing the country risk premium on foreign borrowing and obtaining lower interest rates for the government and private investors. Lower interest rates and more stability in international capital movements cut the cost of servicing the public debt, and encourage higher investment and economic growth. The magnitude of this potential gain is hard to measure. Argentina, now using a currency board under which the peso rate is fixed at a ratio of one-to-one to the U. S. dollar, provides a good example of the difficulties.

There, a higher interest rate for borrowing in pesos than for U. S. dollars persists as evidence that lenders see a risk that the exchange rate peg will be abandoned. Yet interest rates on dollar-denominated Argentine government and private securities also exceed those on industrial countries' debt, reflecting a risk of default by the country, or sovereign risk, on those securities. With dollarization, the interest premium owing to devaluation risk would disappear, but the premium for sovereign risk would not. Since government and the private sector can choose to borrow in foreign or domestic currency in Argentina's heavily dollarized economy, they can already eliminate the cost of devaluation risk by borrowing in dollars. The key question, then, is: would full dollarization, by eliminating currency risk, substantially reduce the default risk premium on dollar-denominated debt? Examining yields on bonds with different features can help disentangle how markets perceive sovereign, or default, risk as distinct from devaluation risk. Sovereign risk can be measured by the spread on dollar-denominated Argentine government bonds over U. S. Treasuries. This spread has tended to come down with time, but has still averaged 3.3 percentage points during 1997­98. Devaluation risk can be measured by the spread between peso - and dollar-denominated Eurobonds, which averaged 2.5 percent over the same period. Arguments exist on both sides of the question of how much of the sovereign, or default, risk to attribute to devaluation risk. Although sovereign risk and devaluation risk move closely together, this does not establish a causal link from one to the other. In fact, it is plausible that most of both dollar and peso spreads are explained by common factors. For example, a global "flight to quality" would raise both the measured risk of default and risk of devaluation. In this case, dollarization would not help reduce dollar spreads very much. In fully dollarized Panama, for instance, the absence of currency risk does not insulate the country from swings in market sentiment toward emerging markets generally.

Moreover, since movements in Panama's spreads cannot reflect devaluation risk, the implication is that at least a part of Argentina's spread also cannot be explained by currency risk alone. Devaluation risk might increase sovereign risk for several reasons. For example, governments acting to avoid currency crises may be increasing the risk of default. Mexico did this in 1994 by issuing too many dollar-denominated bonds or dollar-indexed bonds in its defense of the peso. Or a government may impose capital controls, causing other debtors to default on dollar-denominated debt, as Russia did in 1998, blocking private debtors' access to foreign currency, and preventing them from servicing their foreign debt obligations. Conversely, devaluation may reduce default risk by improving the domestic economy and the fiscal position, as it has in the European Monetary System. Even devaluations that initially slow the economy may improve longer-term prospects and thus reduce the risk of sovereign default. Only by analyzing historical interest rate data for individual countries is it possible to get a sense of the magnitude of the reduction in the risk premium in the event of dollarization, inferring what markets assess as the probability of default on foreign debt in the absence of currency crisis risk. A country adopting a foreign currency as legal tender sacrifices its seigniorage, the profits accruing to the monetary authority from its right to issue currency. The immediate cost of this issuance can be significant, and it continues on an annual basis thereafter.

Dollarization involves two kinds of seigniorage loss. The first is the immediate "stock" cost: as the dollar is introduced and the domestic currency withdrawn from circulation, the monetary authorities must buy back the stock of domestic currency held by the public and banks, effectively returning to them the seigniorage that had accrued over time. Second, the monetary authorities would give up future seigniorage earnings stemming from the flow of new currency printed every year to satisfy the increase in money demand. In the case of Argentina, the first, or stock, cost of dollarization would be the redemption of about $15 billion in domestic currency held outside the central bank, or about 4.0 percent of gross domestic product (GDP). In addition, the loss of seigniorage on account of the increase in currency demand would amount to about another $1.0 billion annually, or about 0.3 percent of GDP. For countries that do not already have enough foreign reserves to buy up their domestic currency and thereby dollarize, the acquisition of the initial stock could add indirect costs. If the country lacks the credit to borrow the reserves, it would be forced to accumulate them through current account surpluses. The cost of this could be substantial in forgone investment if, as is usual for developing countries, the better policy would otherwise be to run some sustainable level of current account deficit. The United States would get more seigniorage from dollarization in other countries. There is, therefore, a case for the U. S. authorities to share part or all of these additional seigniorage revenues with countries that adopt the U. S. dollar. A precedent exists in the arrangements between South Africa and three other states that use the rand (Lesotho, Namibia, and Swaziland). While the United States has no sharing arrangement with Panama or any other legally dollarized economy, there have been some initiatives in the U. S. Senate to consider legislation providing for seigniorage reimbursement. Important as risk spreads and seigniorage are, dollarization may offer gains that, although not immediately observable, may provide larger benefits over time. In addition to raising developing countries' borrowing costs, currency crises wreak havoc on the domestic economy. In Mexico, GDP fell by 7 percent in 1995, and the Asian countries affected by currency crises witnessed recessions in the range of 7­15 percent of GDP in 1998. Most of the severely affected countries in recent crises devalued and floated their exchange rate, but even countries with currency boards such as Hong Kong SAR and Argentina suffered fierce speculative attacks that, although weathered successfully, dealt them serious economic setbacks.

Dollarization will not eliminate the risk of external crises, since investors may flee because of problems of weakness in a country's budget position or the soundness of the financial system. This sort of "debt crisis" can be as damaging as any other, and indeed, Panama has experienced several. Nevertheless, dollarization holds the promise of a steadier market sentiment as the elimination of exchange rate risk would tend to limit the incidence and magnitude of crisis and contagion episodes. Moreover, large swings in international capital flows cause sharp business cycle fluctuations in emerging economies even when they do not involve balance of payments crises. Effect on Trade and Financial Links. A powerful but still longer-term argument for full, legal dollarization is that it makes economic integration easier with the rest of the world, and insulation of the domestic financial system correspondingly more difficult. Dollarization may establish a firm basis for a sound financial sector, and thus promote strong and steady economic growth. The argument here is that dollarization is perceived as an irreversible institutional change toward low inflation, fiscal responsibility, and transparency. Furthermore, dollarization may contribute to greater economic integration than otherwise would be possible with the United States, or any other country whose currency is adopted. A number of studies have found evidence that Canadian provinces tend to be more integrated in trade volume and price level differences among themselves than with U. S. states that are closer geographically, trading in the order of twenty times more among themselves than with nearby U. S. states. The use of a common currency may thus be a vital factor in market integration, given the fairly low transaction costs and restrictions to trade across the U. S.-Canada border. Dollarization could also bring about a closer integration in financial markets. One of the most profound effects of Panama's dollarization is the close integration of its banking system with that of the United States and indeed with the rest of the world, particularly since a major liberalization in 1969–70. With full dollarization, a country completely gives up control of monetary and exchange rate policy. This may seem identical to currency board arrangements, since a country with a currency board cannot devalue.

However, there is some scope for exit from the pegged exchange rate with a currency board, if only under extreme circumstances. Indeed, the elimination of this risk of devaluation is the main purpose of full dollarization. Benefiting from Devaluation. Large shocks, such as a big jump in world oil prices or fall in the price of an important export, may require countries to devalue. Otherwise, they must absorb these shocks through lower nominal wages and adjustments in domestic prices. Substantial recession may then be unavoidable, particularly for economies with rigid labor markets. Experiences such as departures from the gold standard and the 1994 devaluation of the CFA franc suggest that an exit option may have great value in the presence of extreme, unexpected shocks. During the Great Depression, for example, the industrial countries that fared best were those that exited earliest from the fixed exchange regime of the time—the gold standard. Argentina was one of them, suffering only a relatively minor economic setback by abandoning convertibility early, then actively stimulating the economy through monetary policy to offset the deflationary impact of capital outflows. The countries of the CFA franc zone of West and Central Africa are recent examples of states with firmly pegged currencies that have successfully devalued to overcome severe external shocks and sluggish growth. The 14-nation franc zone resembles a currency board, with a fully convertible currency and an exchange rate fixed at par with the French franc from 1948 until 1994. From the second half of the 1980s into the early 1990s, output in the CFA franc zone stagnated as the French franc rose in value against the U. S. dollar, the CFA franc appreciated accordingly, the terms of trade deteriorated, and labor costs rose sharply.

In 1994, the 14 countries resorted to a 50 percent devaluation, achieving a turnaround in higher output, exports, and investment. Finally, countries with highly credible policymakers can also be well placed to benefit from devaluation, since the increase in expectations of inflation is likely to be lower than in countries with records of loose fiscal and monetary policies. For example, the CFA franc zone devaluation caused little inflation, occurring, as it did, against a long history of exclusive reliance on internal adjustments to deal with economic shocks. Devaluations with High Cost. These examples suggest countries may pay a high price for foregoing the option to exit from a fixed exchange rate arrangement. The reverse is true where monetary policy has been poorly managed and expectations of inflation are highly sensitive to the exchange rate. In these countries, devaluation can sharply raise domestic prices, making it hard to achieve changes in the real exchange rate. Similarly, in countries that have become so dollarized that the dollar is often the de facto unit of account, devaluation quickly raises domestic prices, again limiting the effectiveness of devaluations. In fact, these were central reasons why Argentina adopted a currency board. Countries with a high degree of financial asset dollarization have a further reason to avoid devaluation. If a country's banks or corporations receive large amounts of dollar-denominated lending, devaluation sharply worsens their balance sheets. Even if banks on-lend to domestic firms in dollars, maintaining matched risks in terms of currency on their books, they still carry a substantial currency risk. A sharp depreciation of the domestic currency would cause a large drop in revenues in dollar terms for the banks' clients, reducing their ability to service dollar debts.

As the currency crises in Mexico in 1994 and East Asia in 1997 demonstrated, when there are weak banking systems and large foreign exchange exposures in the private sector, the financial health of banks and firms is at such risk following a devaluation that economic activity is severely disrupted. Thus, devaluation as a policy option may be prohibitively costly for highly dollarized economies, and moving to full dollarization would not entail the loss of an important policy tool. Lender of Last Resort Function and Financial System Stability. While full dollarization eliminates vulnerability of the banking system to the risk of devaluation, it does not eradicate all sources of banking crisis. And when they occur, full dollarization may well impair the country's lender-of-last-resort function and hence the central bank's response to financial system emergencies. The central bank's role in operating a discount window to provide short-term liquidity must here be distinguished from its role as the ultimate guarantor of the stability of the financial and payments systems in the event of a systemic bank run. Dollarization should not greatly impede the ability of the authorities to provide short-term liquidity to the system or assistance to individual banks in distress. Such facilities are available if the central bank (or its replacement) saves the necessary funds in advance or perhaps secures lines of credit with international banks. In contrast, the government loses some ability to respond to a sudden run on bank deposits throughout the entire system. In the case of a generalized loss of confidence, the authorities would be unable to guarantee the whole payments system or to fully back bank deposits. Ultimately, the ability to print money as needed is what allows a central bank to guarantee beyond any doubt that all claims (in domestic currency) will be fully met under any circumstances. Once the ability to print money ceases to exist, limits to the lender-of-last-resort function appear. A fully dollarized country that had already spent its foreign currency reserves to redeem its stock of domestic currency might well lack the resources to respond. A Cushion for Currency Boards. Currency boards can create base money only to the extent that they accumulate reserves, so they are almost as tightly constrained as the monetary authorities would be in a dollarized economy. In important currency board cases, however, the authorities have allowed themselves some flexibility to create money that is not fully backed on the margin, partly to be able to deal with banking crises.

In the case of the run on the Argentine peso during the 1995 "tequila" crisis, for example, the Argentine monetary authorities were able to partially accommodate the conversion of peso deposits into dollar deposits held abroad as well as into dollar cash. By temporarily reducing their reserve coverage of the money base, they could increase the issuance of dollar cash and provide the dollar credits the banks needed to stay afloat. In the wake of the 1997 attack on the Hong Kong dollar, the Hong Kong Monetary Authority introduced in September 1998 a discount window to provide short-term liquidity to banks in a more flexible way and at lower cost than under previous arrangements. The new system is expected to reduce the volatility in short-term domestic interest rates. The maximum volume of rediscounts is limited, however, and the Hong Kong Monetary Authority fully backs rediscounts with foreign exchange. The scope for accommodation to bank runs in a currency board is inevitably restricted. Indeed, even without the restrictions imposed by a currency board system, the ability of a central bank to find a way out of a financial crisis by resorting to printing money alone is limited. The injection of liquidity into the banking system to keep it from defaulting on deposits may only lead to greater pressure on foreign reserves or the exchange rate. Summing up, the main pros and cons of dollarization are as follows: Dollarization avoids currency and balance of payments crises.

Without a domestic currency there is no possibility of a sharp depreciation, or of sudden capital outflows motivated by fears of devaluation. A closer integration with both the global and U. S. economies would follow from lower transaction costs and an assured stability of prices in dollar terms. By definitively rejecting the possibility of inflationary finance through dollarization, countries might also strengthen their financial institutions and create positive sentiment toward investment, both domestic and international. Countries are likely to be reluctant to abandon their own currencies, symbols of their nationhood, particularly in favor of those of other nations. As a practical matter, political resistance is nearly certain, and likely to be strong. From an economic point of view, the right to issue a country's currency provides its government with seigniorage revenues, which show up as central bank profits and are transferred to the government. They would be lost to dollarizing countries and gained by the United States unless it agreed to share them. A dollarizing country would relinquish any possibility of having an autonomous monetary and exchange rate policy, including the use of central bank credit to provide liquidity support to its banking system in emergencies. What is the balance of costs and benefits of full dollarization? The answers may seem frustratingly two-handed.

This is inevitable, given the complexity of the issue and the current state of knowledge about it. The potential benefits of lower interest rates and the cost of forgone seigniorage revenues can at least be estimated. But many of the most important considerations, such as the value of keeping an exit option and lender of last resort protections, are virtually unquantifiable. Which countries are likely to benefit from dollarization? The most obvious are those already highly integrated with the United States in trade and financial relations. Yet most countries in Latin America are quite different from the United States in their economic structure and would probably not benefit greatly from dollarization unless accompanied by deep market integration, as in the European Union. The current discussion centers on a different group of candidates: emerging market economies exposed to volatile capital flows but not necessarily close, in an economic sense, to the United States. For this group, the more the U. S. dollar is already used in their domestic goods and financial markets, the smaller the advantage of keeping a national currency. For an economy that is already extremely dollarized, seigniorage revenues would be small (and the cost of purchasing the remaining stock of domestic currency also would be small), the exposures of banks and businesses would make devaluation financially risky, and the exchange rate would not serve as a policy instrument because prices would be "sticky" in dollar terms. In such cases, dollarization may offer more benefits than costs. Andrew Berg is Deputy Assistant Secretary for Latin America and East Asia at the U. S. Treasury. At the time of his research for this pamphlet, he worked in the IMF's Research Department. He has a Ph. D. in Economics from MIT, and was lead economist and head of the Mexico Task Force at the U. S. Treasury during the Mexican peso crisis. Eduardo Borensztein is Chief of the Developing Country Studies Division, Research Department of the IMF, where he has led various studies on dollarization. A Ph. D. in Economics from MIT, he has been a staff member of the IMF since 1984 where, in addition to the Research Department, he has worked in the Asian and the African Departments. Previously, he worked for the Central Bank of Argentina, and was a senior economist at the Foundation for Economic Studies of Latin America, Buenos Aires.

1 Special Administrative Region of the People's Republic of China.



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