Dollarization is a summary description of the use of foreign currency in its capacity to produce all types of money services in the domestic economy.
The money supply in the dollarizing country is limited to what it can earn via exports, borrow and receive from emigrant remittances.
A currency board enables governments to manage their external credibility problems and discipline their central banks by “tying their hands” with binding arrangements.
A currency board system can ultimately be credible only if central bank holds official foreign exchange reserves sufficient to at least cover the entire monetary base.
Its potential drawbacks are that it provides a target for speculative attacks, avoids exchange rate volatility, but not necessarily persistent misalignments, does not by itself place hard constraints on monetary and fiscal policy and that the credibility effect depends on accompanying institutional measures and a visible record of accomplishment.
The potential drawbacks are that member countries suffering asymmetric shocks lose a stabilization tool—the ability to adjust exchange rates.
These systems do not particularly reduce time inconsistency problems nor do they offer specific techniques for maintaining low exchange rate volatility.
A crawling peg attempts to combine flexibility and stability using a rule-based system for gradually altering the currency's par value,[2] typically at a predetermined rate or as a function of inflation differentials.
It provides a limited role for exchange rate movements to counteract external shocks while partially anchoring expectations.
Coudert, Virginie, Cécile Couharde and Valérie Mignon, "Exchange rate flexibility across financial crises",http://www.cepii.fr/PDF_PUB/wp/2010/wp2010-08.pdf