If multiple countries share a currency and one country experiences high inflation, how are the other countries affected?

Question

I’m thinking mainly of the US dollar. Is the inflation rate in the US reflected in other countries which use the dollar or which have currencies pegged to the dollar?

Is this different in the EU, where no one country emits the shared currency?

In: 5

Answer 1

Yes, this totally happens. Greece had a lot of inflation, but they use the Euro now. That made the other Euro countries mad, and they applied political pressure to Greece to change things and get its inflation under control.

Currencies pegged to the dollar are in tiny countries that wouldn’t have liquidity if they tried to have an independent currency, or countries where past inflation disasters have made speculators wary of their currency (talking about you, Zimbabwe).