Dollarization 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 Info
To 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.
Cited by: (explanations, 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.) This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.
Did you know? Citation analysis on IDEAS includes online papers that are freely accessible and whose text could be automatically analyzed, currently about 210000 papers.