Palau uses the U.S. dollar as its currency. This has the advantage of bypassing the expense of running a central bank. Also, the currency is completely convertible,
|Exchange rates: Palau|
|Note: US currency is used in Palau.|
|SOURCE: CIA World Factbook 2001 [ONLINE].|
and price stability is reasonably well ensured, as Palau does not have the ability to print currency. The rate of inflation was less than 3 percent a year from 1996-98. The only drawback for "dollarised" economies is that they do not earn the seigniorage (the profit earned from the minting of coins) they would gain if they issued their own currency. The increasing number of countries that have been attracted to using the U.S. dollar in place of a domestic currency has caused the United States to consider sharing some of the seigniorage it earns as a currency issuer.