(1) it doesn't work like that. The initial inflation is unprecedented as simultaneously the "recalculated" salary falls and production costs rise (for the same reason).
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J Zeledon
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Are They Shitting or Do They Already Know the Trap?
Total dollarization occurs when a country completely replaces its national currency with the US dollar, thereby abandoning its autonomous monetary policy. There are also partial forms, but here we will focus on complete adoption, which implies that the Central Bank loses its ability to issue currency and to use tools such as the interest rate as an instrument of economic policy.
Benefits of dollarization
1. Immediate monetary stability
The main advantage is the elimination of exchange rate risk and local inflation generated by uncontrolled issuance. Countries with hyperinflationary histories, such as Ecuador in the late 90s, found in dollarization an immediate brake on the price spiral and the recovery of confidence in the means of payment.
Benefits of dollarization
1. Immediate monetary stability
The main advantage is the elimination of exchange rate risk and local inflation generated by uncontrolled issuance. Countries with hyperinflationary histories, such as Ecuador in the late 90s, found in dollarization an immediate brake on the price spiral and the recovery of confidence in the means of payment.
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