Opening Statements of Committee Members

Prepared Testimony of Senator Jim Bunning (R-KY)

Hearing on Official Dollarization in Emerging-Market Countries

10:00 a.m., Thursday, April 22, 1999

Mr. Chairman, I would like to thank Federal Reserve Chairman Alan Greenspan, Deputy Treasury Secretary Lawrence Summers and all of our witnesses for testifying today.

As more and more countries, particularly in Latin America, move toward using the dollar as their currency, both officially and unofficially, we need to study and explore the possible ramifications of these actions. Two-thirds of US dollars already circulate outside of our nation. If more and more nations such as Argentina, Ecuador, Mexico and El Salvador either peg their currency to the dollar or completely "dollarize" their currency, what will the affects on our economy and the global economy?

Will using dollars as their official currency handcuff foreign nations when they are experiencing financial crises? Will events in foreign lands significantly affect our monetary policy. Will decisions made in our monetary policy factor in what is best for all countries using the dollar, or will only what is best for the US be a factor. These are some of the questions I believe we need to look at today.

I also believe we must look at the European Union (EU) and what they are doing with the Euro. Are they promoting the Euro as an alternative to the dollar for countries considering dollarization? Are they using the Euro to try and grab a greater share of the expanding Latin America markets and cut into US exports in our Hemisphere? Finally, If the EU is considering some of these packages, how should we respond?

Mr. Chairman, I commend you on holding this hearing and I look forward to hearing from all of our witnesses.

Thank you Mr. Chairman.

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