Reflections on the perspectives of the global economy from the point of view of emerging economies

Maria Luiza Falcão Silva, Joaquim Pinto De Andrade, Thomas S. Torrance

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    1 Citation (Scopus)


    Recently a number of emerging economies, with high inflation and various kinds of imbalances have experienced what has come to be referred to as dollarization - the phenomenon of currency substitution where the dollar gradually replaces the national currency in the performance of its fundamental functions. The phenomenon is most commonly encountered as a component of the exchange-rate-based stabilization programs implemented in a number of emerging economies in Latin America, Asia and the Middle East. The fundamental issue we want to explore is whether this process forces the monetary authorities of emerging economies to act with their hands tied, as if caught in a trap. It is argued that when the expansion of liquidity and domestic credit is determined by the quantity of foreign-exchange reserves, an independent monetary policy vanishes and national sovereignty itself is shackled. Since this scenario typically occurs in a world of increasing globalization of finance, this paper also discusses (with reference to emerging economies) the risks and implications of capital inflows for macroeconomic policy autonomy, economic instability, and vulnerability to external shocks.

    Original languageEnglish
    Pages (from-to)109-129
    Number of pages21
    JournalJournal of Evolutionary Economics
    Issue number1-2
    Publication statusPublished - 2000


    • Dollarization
    • Exchange-rate-based stabilization
    • Speculative attacks
    • Systemic asymmetries


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