Macroeconomics, 2nd Edition by Pearson

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MACROECONOMICS

is also faced with the expense of buying dollars to swap with its national cur-

rency. It pays for these dollars either with its foreign reserves or with the

money from a large dollar-denominated loan. In either case, the cost in terms

of forgone interest payments on its reserves or new interest payments on its

borrowings could be significant. Argentina, for example, would be required to

spend $15 billion to swap its peso currency notes for US dollars.

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Countries

that are dollarized include Marshall Islands, Micronesia, Palau, and Panama,

all small economies except Panama, where most goods are traded internation- ...