Smuggling, Currency Substitution and Unofficial Dollarization: A Crime-Theoretic Approach

by Alex Mourmouras

Large quantities of U.S. dollars and other hard currencies circulate alongside domestic currencies in many countries of the former Soviet Union, in Central, Eastern, and Southeastern Europe, the Middle East, Latin America and elsewhere. Over half of all U.S. currency outside banks is located abroad, and the foreign stock of U.S. currency has been growing about 3 times as fast as the domestic stock during the 1990s. Similarly, 30-40 percent of the deutsche marks outstanding are held outside Germany.2 The high degree of unofficial dollarization is one reason some emerging market policymakers sought to go the extra step of officially dollarizing their economies.3

90 pages, Kindle Edition

First published October 1, 2000