tal that might exist within the country may move outside the country in search of more stable currencies, and foreign investors are likely to be put off by the risk associated with the nation. High inflation rates and high deficit levels may contribute to these fears and cause capital flight. When these conditions exist and persist for some period of time, nations may be forced to take action in order to protect their domestic economies (Quispe-Agnoli 10).
When countries take the drastic step of adopting another country's currency, they eliminate the ability of their own central bank to serve as the lender of last resort to their financial sector. The Fed is under no such obligation to service Ecuador's financial system, for example, although the nation remains dollarized. This ostensibly weakens the nation's ability to control its financial affairs, but such potential weakness is ostensibly offset by the stability of using the dollar as the currency in trade. If the dollar
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