Dollarization is the term for when the U.S. dollar is used in addition to or instead of the domestic currency of another country. It can be a formal arrangement, such as when Panama adopted the U.S. dollar as its official currency in 1904, or it can be unofficial, such as when Argentines use dollars to buy goods and services on the black market because they distrust their own peso-based economy.There are pros and cons to using dollars instead of a domestic currency: on one hand, dollarization can provide stability during times of economic crisis; on the other hand, it can limit a country's ability to control its own monetary policy and lead to inflation if too many dollars enter into circulation.
