Dollarization In El Salvador

Dollarization in El Salvador

This as a public information, as well as Panama and Ecuador, are dollarized, with the aggravating or advantage, everyone who sees it and thinks, that the Salvadoran Colon, disappeared.

El Salvador
El Salvador is officially dollarized since January 1, 2001. For 2000, the large flow of remittances had an impact on macroeconomic stability. Open market operations were trying to keep inflation down as had been maintained during the 90's, but the excess liquidity by excessive foreign exchange and interest rates pushed up. These regulatory measures were a financial cost to the Central Bank, which was an additional source of fiscal imbalances originated monetary nature, called quasi-fiscal. It was estimated that these costs close to 1% of GDP at the end of 2000.4
In late 2000 the then President of El Salvador, Francisco Flores, said that as of January 1, 2001 would become effective the Monetary Integration Law, which raised, among other things, free movement of dual currency and Salvadoran Colon estadounidense.5 dollar which occurred a few months. Later the country was pulling out completely dollarized, arbitrarily, in colon of movement and leaving only the dollar as legal tender. Since the course bimonetarism law was never given, because according to Article 5 of the same, instructs the Central Bank to collect the available colones. The law stated:
1. Fix the price of $ 1.00 = ¢ 8.75
2. Declaring the U.S. dollar as official currency alongside the colon.
3. The banks buy U.S. dollars and sold as necessary.
4. Commercial transactions, bank accounts and product prices can be expressed both in dollars and colones.
Some of the consequences of dollarization are:
• Increased cost of living.
• Increase in prices of products and services.
• Loss of Central Bank's role as issuer of last resort.
• The loss of purchasing power of wages, among others.



Taken from Wikipedia