The Benefits of Dollarization When Stabilization Policy Lacks Credibility and Financial Markets Are Imperfect
AbstractDollarization entails two potentially large benefits for emerging economies. First, it may eliminate price and wealth distortions induced by the lack of credibility of stabilization policies. Second, it may improve the efficiency of financial markets by weakening informational or institutional frictions driving credit constraints. Quantitative analysis of a dynamic, stochastic equilibrium model calibrated to Mexican data shows that the mean welfare gains of eliminating policy uncertainty are staggering, ranging between 6.4 and 9 percent of trend consumption. The mean welfare gain of weakening credit constraints is 4.6 percent. Liability dollarization and sharp fluctuations in relative prices play a key role in these results.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 33 (2001)
Issue (Month): 2 (May)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
Other versions of this item:
- Enrique G. Mendoza, 2001. "The benefits of dollarization when stabilization policy lacks credibility and financial markets are imperfect," Proceedings, Federal Reserve Bank of Cleveland, pages 440-481.
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral 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: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.