Monetary integration: dollarization in El Salvador

Abstract

The BCR will lose the power to issue the currency and will not be able to exercise seignior age. The BCR loses the ability to handle monetary policy. The foreign exchange reserves of the BCR are transferred to the public (irreversible process or trip without return). The BCR does not intervene in the foreign exchange market. It will provoke an immediate and inevitable rise in prices of goods and services due to "rounding". Simplify and facilitate business relationships with a common currency. The exchange differential as an artificial comparative advantage disappears.