An analysis of the official dollarization regime in Montenegro: Theoretical approaches and empirical evidence

Abstract

Through official unilateral dollarization, the economic system of Montenegro faced the records of real costs and benefits, which finally resulted in economic indicators. The absence of sovereignty, i.e. independence of monetary policy and exchange rate policy, decreases monetary factors’ effects which are measured by realized macroeconomic performances. Because official dollarization should promote credibility, macroeconomic stability and sustainable growth, it is necessary to make a distinction between monetary regime calculus in Montenegro before initiating crisis structural disorder from the period of the effectuation of adverse trends, for the purpose of providing final evaluation of the functioning of dollarized economy. Empirical research conducted to show the effects of the official dollarization in Montenegro explicitly emphasized the specific weight of costs and benefits, suggesting that achieved macroeconomic performances are not exclusively the result of monetary regime functioning.