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Prudential Responses to De Facto Dollarization Author info | Abstract | Publisher info | Download info | Related research | Statistics Andrew Powell
Alain Ize
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We develop a theoretical framework that encompasses four distinct motives for dollarization and discuss appropriate policy responses to help contain dollarization and its attendant risks. "Moral hazard" dollarization provides a clear case for prudential policy activism. However, prudential reform will have only a limited impact on dollarization when the main culprits are fear of floating and lack of monetary credibility. In such cases, a concerted and comprehensive reform agenda, including market-oriented and institutional reforms, would be needed to shift the balance of risks in favor of the domestic currency. While quantitative limits on dollarization could also be used to speed up de-dollarization, risks could be high.
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Paper provided by International Monetary Fund in its series IMF Working Papers with number
04/66.
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Length: 41 pages
Date of creation: 11 May 2004Date of revision:
Handle: RePEc:imf:imfwpa:04/66Contact details of provider: Postal: International Monetary Fund, Washington, DC USA Phone: (202) 623-7000 Fax: (202) 623-4661 Email: Web page: http://www.imf.org/external/pubind.htm More information through EDIRC
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Keywords: Dollarization Monetary policy Financial crisis Financial systems Currencies Exchange risk Economic models Other versions of this item:
This paper has been announced in the following NEP Reports :
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.: Martin Schneider & Aaron Tornell, 2000.
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Douglas Gale & Xavier Vives, 2002.
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Cowan, kevin & Quy-Toan Do, 2003.
"Financial dollarization and central bank credibility ,"
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Burnside, Craig & Eichenbaum, Martin & Rebelo, Sergio, 2001.
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Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 1999.
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references 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.)
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Hans Keiding & Mette J. Knudsen, 2005.
"Rational Fear of Floating: A Simple Model of Exchange Rates and Income Distribution ,"
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