Dollarization

noun (uncountable)

/ˌdɒləraɪˈzeɪʃn/

The process by which a country adopts a foreign currency — most commonly the US dollar — as its primary or sole legal tender, either officially (full dollarization, as in Ecuador and Panama) or informally (partial dollarization, where the foreign currency circulates alongside the domestic currency due to hyperinflation or currency distrust). Full dollarization surrenders monetary policy autonomy and seigniorage revenue. In India, the concept has academic relevance as a warning against currency crises and is studied in the context of Sri Lanka's 2022 foreign exchange crisis and proposed 'de-dollarization' in BRICS trade settlement.

✍️ Usage in a UPSC answer

BRICS nations' push for de-dollarization in bilateral trade — typified by India-Russia rupee-rouble settlement discussions — reflects a strategic effort to insulate current account transactions from US sanctions risk without requiring formal dollarization.

Synonyms

currency substitutionmonetary unificationforeign currency adoptioncurrency surrender

Antonyms

monetary sovereigntydomestic currency usede-dollarizationcurrency independence

🌱 Word Family

dollarise (verb), dollarised economy (noun phrase), de-dollarization (noun), partial dollarization (noun phrase)

🔡 Root

Proper noun Dollar (from German Thaler) + Latin -izare = to make into; -ation = process

📜 Etymology

The word dollar derives from German Thaler (short for Joachimsthaler, a silver coin minted in Joachimsthal, Bohemia, from 1519). The process noun 'dollarization' emerged in the 1980s–1990s in Latin American monetary economics literature, particularly in IMF and World Bank analyses of Argentina, Ecuador, and El Salvador.

🧠 Memory Hook

DOLLARIZATION = making the DOLLAR your only 'ization' (nation's currency). Imagine a country so distrustful of its own money that it DRESSES in dollar bills instead of its own coat.

💰 Indian Economy 📖 Seen in: Indian Economy — Growth, Planning & De...

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