conducting monetary policy in dollarized economy

   I argue in this statement is that we cannot conduct monetary policy in dollarized economy.First we need to understand what monetary policy and dollarized economy is.  

    Friedman said in recession monetary expansion can rescue the economy by lowering interest rate and then boost investment. How central bank conduct monetary policy are followed;

a.       lower reserve requirement at central bamk

b.      open market operation by buying government bond

c.       increase lending to commercial bank

    Cambodia is a very good example of dollarized economy. Dollarization is refered to using dollar along with national currency or using dollar as legal tender.

Now we go to central point of conducting monetary policy in dollarized economy;

1. lower reserve requirement at central bank which mean that commercial bank should reserve dollar at central bank account.
2. Open market operation; should we issue bond in national currency or dollar
3. Increase lending to commercial bank; how can central bank increase lending in dollar if central bank hold only national currency.

This essay is just my tentative attempt for sharing discussion is this lovely forum.

Hope to see many comments.

Chim Socheat