"Dollarization" and currency boards are examples of exchange rate systems that provide relatively large independent monetary policy as compared to floating exchange rates.

Question

Quizplus · Accepted Answer

"Dollarization" and currency boards actually provide very limited independent monetary policy, as they tie the value of the domestic currency to that of a stronger foreign currency (usually the US dollar) and limit the ability of the domestic central bank to adjust interest rates or manipulate the money supply. Therefore, they offer less independence than floating exchange rates.

"Dollarization" and Currency Boards Are Examples of Exchange Rate Systems