Advanced Search
MyIDEAS: Login

Dollarization, exchange rate regimes and government quality

Contents:

Author Info

  • Honig, Adam

Abstract

The dollarization of the domestic banking system represents a source of vulnerability for emerging market countries, and a debate has emerged over whether the exchange rate regime has an impact on dollarization. This paper argues that the regime is far less important than the literature has previously claimed. Unofficial dollarization results from a lack of faith in the domestic currency, which ultimately stems from the belief that the government will not follow policies that promote long-run currency stability. Empirical results indicate that improved government quality reduces unofficial dollarization, while the exchange rate regime plays no direct role in promoting dollarization.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6V9S-4V59VSH-1/2/9730648921f9028c56c03a4f2701b2b6
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 28 (2009)
Issue (Month): 2 (March)
Pages: 198-214

as in new window
Handle: RePEc:eee:jimfin:v:28:y:2009:i:2:p:198-214

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/30443

Related research

Keywords: Unofficial dollarization Exchange rate regimes Government quality;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Carmen M. Reinhart & Kenneth S. Rogoff, 2002. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," NBER Working Papers 8963, National Bureau of Economic Research, Inc.
  2. Barry Eichengreen & Ricardo Hausmann, 1999. "Exchange rates and financial fragility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 329-368.
  3. Demirguc-Kunt, Asli & Detragiache, Enrica, 1999. "Does deposit insurance increase banking system stability ? An empirical investigation," Policy Research Working Paper Series 2247, The World Bank.
  4. Acemoglu, Daron & Johnson, Simon & Robinson, James A & Thaicharoen, Yunyong, 2002. "Institutional Causes, Macroeconomic Symptoms: Volatility, Crises and Growth," CEPR Discussion Papers 3575, C.E.P.R. Discussion Papers.
  5. J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers 185, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Reinhart, Carmen & Calvo, Guillermo, 2002. "Fear of floating," MPRA Paper 14000, University Library of Munich, Germany.
  7. Burnside, A Craig & Eichenbaum, Martin & Rebelo, Sérgio, 1999. "Hedging and Financial Fragility in Fixed Exchange Rate Regimes," CEPR Discussion Papers 2171, C.E.P.R. Discussion Papers.
  8. Atish R. Ghosh & Anne-Marie Gulde & Jonathan D. Ostry & Holger C. Wolf, 1997. "Does The Nominal Exchange Rate Regime Matter?," Working Papers 97-09, New York University, Leonard N. Stern School of Business, Department of Economics.
  9. Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003. "Addicted to Dollars," CEMA Working Papers 594, China Economics and Management Academy, Central University of Finance and Economics.
  10. John D. Burger & Francis E. Warnock, 2003. "Diversification, original sin, and international bond portfolios," International Finance Discussion Papers 755, Board of Governors of the Federal Reserve System (U.S.).
  11. Ricardo Hausmann & Michael Gavin & Carmen Pagés-Serra & Ernesto H. Stein, 1999. "Financial Turmoil and Choice of Exchange Rate Regime," Research Department Publications 4170, Inter-American Development Bank, Research Department.
  12. Marta Campillo & Jeffrey A. Miron, 1997. "Why Does Inflation Differ across Countries?," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 335-362 National Bureau of Economic Research, Inc.
  13. Ize, Alain & Yeyati, Eduardo Levy, 2003. "Financial dollarization," Journal of International Economics, Elsevier, vol. 59(2), pages 323-347, March.
  14. Adam Bennett & Eduardo Borensztein & Tomás J. T. Baliño, 1999. "Monetary Policy in Dollarized Economies," IMF Occasional Papers 171, International Monetary Fund.
  15. Haan, Jakob de & Kooi, Willem J., 2000. "Does central bank independence really matter?: New evidence for developing countries using a new indicator," Journal of Banking & Finance, Elsevier, vol. 24(4), pages 643-664, April.
  16. Sebastian Edwards, 1996. "The Determinants of the Choice between Fixed and Flexible Exchange-Rate Regimes," NBER Working Papers 5756, National Bureau of Economic Research, Inc.
  17. Honig, Adam, 2005. "Fear of floating and domestic liability dollarization," Emerging Markets Review, Elsevier, vol. 6(3), pages 289-307, September.
  18. Olivier Jeanne, 2003. "Why Do Emerging Economies Borrow in Foreign Currency?," IMF Working Papers 03/177, International Monetary Fund.
  19. Hélène Poirson, 2001. "How Do Countries Choose their Exchange Rate Regime?," IMF Working Papers 01/46, International Monetary Fund.
  20. Frederic S. Mishkin, 2004. "Can Inflation Targeting Work in Emerging Market Countries?," NBER Working Papers 10646, National Bureau of Economic Research, Inc.
  21. Guillermo Calvo & Frederic S. Mishkin, 2003. "The Mirage of Exchange Rate Regimes for Emerging Market Countries," NBER Working Papers 9808, National Bureau of Economic Research, Inc.
  22. Guillermo Calvo & Carlos A. Végh Gramont, 1992. "Currency Substitution in Developing Countries," IMF Working Papers 92/40, International Monetary Fund.
  23. Calvo, Guillermo & Vegh, Carlos, 1992. "Currency Substitution in Developing Countries: An Introduction," MPRA Paper 20338, University Library of Munich, Germany.
  24. Arteta Carlos O., 2005. "Exchange Rate Regimes and Financial Dollarization: Does Flexibility Reduce Currency Mismatches in Bank Intermediation?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-30, May.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Narayan K. Kishor & Kyriakos C. Neanidis, 2012. "What is Driving Financial Dollarization in Transition Economies? A Dynamic Factor Analysis," Centre for Growth and Business Cycle Research Discussion Paper Series 171, Economics, The Univeristy of Manchester.
  2. Pierre-Olivier Gourinchas & Maurice Obstfeld, 2011. "Stories of the Twentieth Century for the Twenty-First," NBER Working Papers 17252, National Bureau of Economic Research, Inc.
  3. Kyriakos C. Neanidis, 2010. "Financial Dollarization and European Union Membership," Centre for Growth and Business Cycle Research Discussion Paper Series 143, Economics, The Univeristy of Manchester.
  4. Kyriakos C. Neanidis & Christos S. Savva, 2013. "Institutions and Financial Dollarization: Indirect Effects based on a Policy Experiment," Centre for Growth and Business Cycle Research Discussion Paper Series 187, Economics, The Univeristy of Manchester.
  5. Fabricio De Assis Campos Vieira & Márcio Holland & Marco Flávio Da Cunha Resende, 2014. "Financial Dollarization And Systemicrisks: New Empirical Evidence," Anais do XL Encontro Nacional de Economia [Proceedings of the 40th Brazilian Economics Meeting] 040, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  6. Calderón, César & Kubota, Megumi, 2013. "Sudden stops: Are global and local investors alike?," Journal of International Economics, Elsevier, vol. 89(1), pages 122-142.
  7. repec:idb:brikps:14578 is not listed on IDEAS
  8. Guillermo Calvo & Frederic S. Mishkin, 2003. "The Mirage of Exchange Rate Regimes for Emerging Market Countries," NBER Working Papers 9808, National Bureau of Economic Research, Inc.
  9. Kutan, Ali & Ozsoz, Emre & Rengifo, Erick, 2012. "Dynamics of Foreign Currency Lending in Turkey," MPRA Paper 36214, University Library of Munich, Germany.
  10. Claude Bismut & Darine Ghanem, 2009. "This paper investigates empirically the reasons behind the popularity of fixed adjustable pegs in the Middle East North Africa region (MENA). We have used an ordered multinomial random effects probit ," Working Papers 09-10, LAMETA, Universtiy of Montpellier, revised Sep 2009.
  11. Uluc Aysun & Adam Honig, 2008. "Bankruptcy Costs, Liability Dollarization, and Vulnerability to Sudden Stops," Working papers 2008-41, University of Connecticut, Department of Economics.
  12. Erick W. Rengifo & Emre Ozsoz & Mustapha A. Akinkunmi & Eduardo Court, 2013. "Bank Regulation in Dollarized Economies: The Case of Turkey," International Journal of Financial Studies, MDPI, Open Access Journal, vol. 1(4), pages 137-153, November.
  13. Chen, Xiaofen, 2012. "The dampening effect of bank foreign liabilities on monetary policy: Revisiting monetary cooperation in East Asia," Journal of International Money and Finance, Elsevier, vol. 31(2), pages 412-427.
  14. Lula G. Mengesha & Mark J. Holmes, 2013. "Does Dollarization Alleviate Or Aggravate Exchange Rate Volatility?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 38(2), pages 99-118, June.
  15. Adamcik, Santiago, 2008. "Sobre la Elección de Regímenes de Tipo de Cambio en Economías Emergentes
    [On Choosing an Exchange Rate Regimes in Emerging Economies]
    ," MPRA Paper 9329, University Library of Munich, Germany.
  16. Bruce N. Lehmann & David M. Modest, 1985. "The Empirical Foundations of the Arbitrage Pricing Theory I: The Empirical Tests," NBER Working Papers 1725, National Bureau of Economic Research, Inc.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:jimfin:v:28:y:2009:i:2:p:198-214. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.