There are some economic terms and processes which impact the economic on the world level, and we should know about them at least in general. Dollarization is the process when the certain country abandons its own currency in favor of the currency of the any other country. From the one side it is even beneficial because it provides the stable currency. Unfortunately, the country who decides to change the currency is left without monetary independence and with no power to print new currency. Obviously it means that the country who controls the currency may not take into account that these actions may have the influence on the economy of the secondary country.
There is a common situation which concerns the fiscal policy because it deals with the way of handling the money by the country. The rest of examples of such fiscal policies are the floating currencies, monetary union and the currency board. The two last policies have so-called fixed exchange rates. It happens when the currency rates which deal with the trade are regulated. At the same time such rates don’t differ trade from the trade. This way helps the currency to be dependent and stable for the business. Having fixed currency exchange, the currency board is the one example of the fiscal policy. It is the situation when the local currency is still used, but for instilling the stability the local currency is backed by another currency which is held in the central bank. This system brings the stability for the one main reason. Such system brings the stability because a currency board has no opportunity to print the money without being able to back them up.
There is so interesting monetary order in the Netherlands because of their environment. The local currency is Netherlands gulden, guilders or florins which create the current system of the country. And that is one of the reasons why it has the fixed exchange rate with the American dollar since 1989. Since that time the US $1 is 1.79 Netherlands guldens. It is made to be interesting by the environment because Netherlands was among the eleven countries which enter to the European Union. It is the monetary union of countries of Europe. It has the certain importance because the union introduced the common currency as the euro which has the fixed rate of 2.20371 guilders of Netherlands per euro. At the same time the euro is going to replace the local currency in consenting with the rest of countries for all transactions in the year 2002.
There are some economic terms and processes which impact the economic on the world level, and we should know about them at least in general. Dollarization is the process when the certain country abandons its own currency in favor of the currency of the any other country. From the one side it is even beneficial because it provides the stable currency.