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Global Implications of Dollarizing Economies to Attain Monetary StabilityDollarization is when one country abandons its own currency in favor ofanother countrys currency This is good because it will provide a stable currency butunfortunately the country who changed its currency has no monetary independenceand no power to print currency This means that the country controlling the currencymay not keep in mind the affect actions may have on the secondary countryseconomy This is an example of a fiscal policy because it deals with the way acountry handles its money Other examples of fiscal policies are floating currenciespegged or currency board and a monetary union The two latter have what we callfixed exchange rates This is when currency rates dealing with trade is regulated anddoesnt differ trade from trade It helps the currency remain stable and dependent forbusinesses A currency board is one example of a fiscal policy that has a fixedcurrency exchange This situation is when a local currency is used but to instillstability the local currency is backed by another currency held by a central bank Onereason this system brings stability because a currency board cant print money withoutThe Netherlands has a rather interesting monetary order because oftheir environment They have a current system where the local currency is Netherlandsguilders gulden or florins and this has had a fixed exchange rate with the US dollarsince 1989 of 179 gullden to US1 There environment makes this interestingbecause Netherlands was one of eleven countries to enter the European UnionEU amonetary union of European countries This is important because the union justintroduced a common currency of the euro witch has a fixed rate of 220371 guildersper euro The euro will replace the local currency in consenting countries for allI dont believe that the Netherlands has had a balance of payment crisisin the recent past because their was a Dutch economic boom in 1996 that continued to1997 and ever since 1989 the local currency has had a fixed exchange rate
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