One of the first signs that greets arriving passengers at Kathmandu's Tribhuvan Airport instructs them to ‘first clear immigration before you pass out’. On a recent trip to Nepal I fully appreciated the airport authority's concern. Thanks to the bumpy flight over the Himalayas, one does feel somewhat light in the head as one conducts oneself through the rites of entering the country.

I took to Nepal quickly. It is beautiful; the people lack intrigue; the artwork on building façades and thangkas is exquisite. Besides, there is much to occupy an economist's attention—the haggling in the bazaars, the attitude to money and work among auto-drivers and roadside entrepreneurs, the stratagems and irrationalities in gambling parlours, and, most remarkably, the economy's ability to effortlessly switch between two currencies. Buy a yak-bone sculpture, have a meal at Rum Doodles (highly recommended), or take a taxi. Everywhere you have the choice of paying in Nepalese or Indian rupees.

This is a textbook case of ‘currency substitution’ or ‘dollarization’, where one economy accepts another's currency for its day-to-day transactions. This need have nothing to do with the dollar—though it often does. For instance, Panama has no national currency of significance. It runs on American money. It is true that it saves on running a central monetary authority, but the policy makes Panama vulnerable to the actions of the American Fed.