Working Paper: NBER ID: w9514
Authors: Sebastian Edwards; Igal Magendzo
Abstract: In this paper we analyze whether common currency' countries that is, dollarized and independent currency union countries have outperformed countries that have a currency of their own. The paper is empirical and estimates jointly the probability of being a common currency country and outcome' equations for growth, volatility and inflation. We find that both type of common currency countries have lower inflation than countries with a domestic currency. Dollarized countries have lower growth and higher volatility than countries with a domestic currency. Currency unions, on the other hand, have higher growth and higher volatility than countries with a currency of their own.
Keywords: No keywords provided
JEL Codes: F3; F4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| common currency (F36) | lower inflation (E31) |
| dollarized countries (F31) | lower growth (O40) |
| dollarized countries (F31) | higher volatility (G17) |
| ICU countries (O57) | higher growth (O49) |
| ICU countries (O57) | higher volatility (G17) |