Dollarization Case

What do you think of when you hear the word “economy”? Well, the economy can be very complex but quite often, we tend to think of the market, supply and demand or inflation when the concept of economy is brought up. While this is usually true, one more factor in the economy that cannot be neglect is money. Of course, almost every person in the world or at least those that participate themselves in economic activities, tends to familiarize themselves with the concept of money. For those that are not completely sure about the definition of money, it is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given socio-economic context. Money in general has many functions and also varies in many forms as well. However, on international standard, money can be distinctive from country to country in form of currency. Whereas dollar is the national currency in the United States, yen is the national note in Japan and riel in Cambodia.

It is very usual for each country to have its own distinctive local currency. Nonetheless, it is very noticeable that in some countries, the market is not dominated solely by the national currency alone. On the contrary, there are mixture uses of foreign currency in conjunction with the domestic notes. For instances, in Cambodia, dollar is just as widely accepted as the national currency, riel. So why can the US notes, be used in the Cambodia economy? Well, the answer lies in the concept of the “Dollarization”. As the term may suggest, dollarization refer to the economy in which the market use foreign currency (not necessarily dollar) in parallel to or instead of the domestic currency as medium of exchange, store of value and unit of account. As we may have realized now, Cambodia is actually under the effect of dollarization. For instance, if we were to go shopping in a supermarket, most prices of the goods are likely to be stated in dollar. In addition, most of the big business