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I don’t understand why using USD results in an import economy. There’s nothing that stops dollars from circulating domestically, is there? I was suggesting it
by md_ 6y ago
I don’t understand why using USD results in an import economy. There’s nothing that stops dollars from circulating domestically, is there?
I was suggesting it reduces the government’s ability to apply monetary policy, but that’s a bit different than your point I think, no?
- jl2718 6y agoThere are a couple of things. The simplest one is that dollars leave the economy as soon as you deposit them in a bank because they get lent internationally versus local currency loans that stay local. The other is that imports are generally preferred in developing economies. It’s also hard for the government to tax transactions made in a foreign currency because they only really see local bank transactions and foreign exchanges.