Source: EconLog
by Scott Sumner
“With Javier Milei’s recent election victory, there is speculation that Argentina might drop the peso and dollarize its economy. I won’t speculate on how likely that is to occur, as I don’t know much about the political situation in Argentina. But I do have a few comments on the economics of dollarization: 1. Dollarization would solve the problem of hyperinflation. 2. If Argentina intends to dollarize, now would be a good time to do so. 3. Dollarization is not a panacea. Argentina still needs Chilean-style economic reforms, and there’s no guarantee that dollarization would lead to those reforms. 4. Dollarization is less risky than a currency board, but not completely free of risk.” (11/20/23)