When a country’s own money is replaced as its citizens’ preferred currency by the US dollar. This can be a deliberate government policy or the result of many private choices by buyers and sellers (for instance, at the first sign of trouble, investors across Latin America generally flee into dollars). When it is government policy, dollarization is, in essence, a beefed up currency board. The appeal of dollarization is that the value of the dollar is more stable than the distrusted local currency, which may well have a history of suddenly falling in value. By eliminating all possible risk of devaluation against the dollar, the cost of local companies’ and the government’s borrowing in international markets is reduced, as the currency risk is removed. A big downside is that the country hands over control of monetary policy to the Federal Reserve, and the right interest rate for the United States may not be appropriate for the dollarized country, if that country and the United States do not constitute an optimal currency area. This is one reason that in some countries the local currency has been displaced by another fairly stable currency, such as, in some central European economies, the Euro (and before that the d-mark).