Advanced Search
MyIDEAS: Login to save this paper or follow this series

Financial De-Dollarization

Contents:

Author Info

  • Eduardo Levy Yeyati
  • Alain Ize

Abstract

De facto (unofficial) dollarization, defined as the holding by residents of assets and liabilities denominated in a foreign currency, is a policy concern in an increasing number of developing economies. This paper addresses the dollarization debate from this perspective, with the goal of setting the stage for a more detailed and focused discussion of whether de-dollarization should be a policy objective and, if so, how best to pursue this objective. We review existing theories of de facto dollarization and the extent to which they are supported by the available evidence, presents the main strategies for reform, and proposes a list of policy recommendations.

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.imf.org/external/pubs/cat/longres.aspx?sk=18438
Download Restriction: no

Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/187.

as in new window
Length: 31
Date of creation: 01 Sep 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/187

Contact 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

Order Information:
Web: http://www.imf.org/external/pubs/pubs/ord_info.htm

Related research

Keywords: Dollarization; exchange rate; exchange rate regimes; real exchange rate; currency substitution; exchange rate flexibility; exchange rate depreciation; currency markets; exchange rates; exchange rate volatility; exchange rate regime; exchange rate devaluations; nominal exchange rate; exchange rate policy; balance sheets; exchange rate pass; flexible exchange rate; currency risk; exchange rate overvaluations; currency depreciation; financial crises; exchange rate depreciations; international markets; exchange rate floats; exchange rate shocks; exchange rate movements; volatile exchange rate; exchange rate misalignments; exchange rate pegs; currency turmoil; flexible exchange rate regime; open capital accounts; rigid exchange rate regimes; exchange rate anchor; exchange rate commitment; exchange rate risk; capital flight; economic downturns; capital accounts; real exchange rate depreciation; fixed exchange rate regimes; exchange rate management; flexible exchange rate regimes; real exchange rate overvaluations; currency areas; fixed exchange rate;

This paper has been announced in the following NEP Reports:

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 & Miguel A. Savastano, 2003. "Addicted to Dollars," CEMA Working Papers 594, China Economics and Management Academy, Central University of Finance and Economics.
  2. Banerjee, Abhijit & Bacchetta, Philippe & Aghion, Philippe, 2001. "Currency Crises and Monetary Policy in an Economy with Credit Constraints," Scholarly Articles 4554218, Harvard University Department of Economics.
  3. Levy-Yeyati, Eduardo & Martinez Peria, Maria Soledad & Schmukler, Sergio L., 2004. "Market discipline under systemic risk - evidence from bank runs in emerging economies," Policy Research Working Paper Series 3440, The World Bank.
  4. Roberto Chang & Andres Velasco, 2004. "Monetary policy and the currency denomination of debt: a tale of two equilibria," Working Paper Series 2004-30, Federal Reserve Bank of San Francisco.
  5. Chang, Roberto & Velasco, Andres, 2000. "Financial Fragility and the Exchange Rate Regime," Journal of Economic Theory, Elsevier, vol. 92(1), pages 1-34, May.
  6. Guillermo A. Calvo & Alejandro Izquierdo & Luis Fernando Mejía, 2004. "On the Empirics of Sudden Stops: The Relevance of Balance-Sheet Effects," IDB Publications 6516, Inter-American Development Bank.
  7. Luis Felipe Céspedes & Roberto Chang & Andrés Velasco, 2004. "Balance Sheets and Exchange Rate Policy," American Economic Review, American Economic Association, vol. 94(4), pages 1183-1193, September.
  8. de la Torre, Augusto & Schmukler & Sergio L., 2004. "Coping with risk through mismatches : domestic and international financial contracts for emerging economies," Policy Research Working Paper Series 3212, The World Bank.
  9. Barry Eichengreen & Ricardo Hausmann & Ugo Panizza, 2003. "Currency Mismatches, Debt Intolerance and Original Sin: Why They Are Not the Same and Why it Matters," NBER Working Papers 10036, National Bureau of Economic Research, Inc.
  10. Ricardo J. Caballero & Arvind Krishnamurthy, 2002. "A Dual Liquidity Model for Emerging Markets," NBER Working Papers 8758, National Bureau of Economic Research, Inc.
  11. Carlos O. Arteta, 2003. "Are financially dollarized countries more prone to costly crises?," International Finance Discussion Papers 763, Board of Governors of the Federal Reserve System (U.S.).
  12. Claessens, Stijn & Klingebiel, Daniela & Schmukler, Sergio, 2003. "Government Bonds in Domestic and Foreign Currency: The Role of Macroeconomic and Institutional Factors," CEPR Discussion Papers 3789, C.E.P.R. Discussion Papers.
  13. Eduardo Levy-Yeyati & Federico Sturzenegger & Iliana Reggio, 2009. "On the endogeneity of exchange rate regimes," Economics Working Papers we098374, Universidad Carlos III, Departamento de Economía.
  14. Hoyt Bleakley & Kevin Cowan, 2005. "Corporate Dollar Debt and Depreciations: Much Ado About Nothing?," Research Department Publications 4411, Inter-American Development Bank, Research Department.
  15. Galindo, Arturo & Panizza, Ugo & Schiantarelli, Fabio, 2003. "Debt composition and balance sheet effects of currency depreciation: a summary of the micro evidence," Emerging Markets Review, Elsevier, vol. 4(4), pages 330-339, December.
  16. Eduardo Levy Yeyati & Alain Ize & Miguel A. Kiguel, 2005. "Managing Systemic Liquidity Risk in Financially Dollarized Economies," IMF Working Papers 05/188, International Monetary Fund.
  17. 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.
  18. Alain Ize, 2005. "Financial Dollarization Equilibria," IMF Working Papers 05/186, International Monetary Fund.
  19. Alain Ize & Eric Parrado, 2002. "Dollarization, Monetary Policy, and the Pass-Through," IMF Working Papers 02/188, International Monetary Fund.
  20. Alejandro Izquierdo, 2002. "Sudden Stops, the Real Exchange Rate and Fiscal Sustainability in Argentina," The World Economy, Wiley Blackwell, vol. 25(7), pages 903-923, 07.
  21. Alain Ize & Andrew Powell, 2005. "Prudential Responses to de facto Dollarization," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 8(4), pages 241-262.
  22. Fukuda, Shin-ichi & Hoshi, Takeo & Ito, Takatoshi & Rose, Andrew, 2006. "International Finance," Journal of the Japanese and International Economies, Elsevier, vol. 20(4), pages 455-458, December.
  23. Carranza, Luis & Galdon-Sanchez, Jose E. & Gomez-Biscarri, Javier, 2009. "Exchange rate and inflation dynamics in dollarized economies," Journal of Development Economics, Elsevier, vol. 89(1), pages 98-108, May.
  24. 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.
  25. Caballero, Ricardo & Krishnamurthy, Arvind, 2005. "Exchange Rate Volatility and the Credit Channel in Emerging Markets: A Vertical Perspective," MPRA Paper 824, University Library of Munich, Germany.
  26. Anne Marie Gulde & David S. Hoelscher & Alain Ize & David Marston & Gianni De Nicoló, 2004. "Financial Stability in Dollarized Economies," IMF Occasional Papers 230, International Monetary Fund.
  27. Thomas, Lee R, 1985. "Portfolio Theory and Currency Substitution," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(3), pages 347-57, August.
  28. Arturo Galindo & Leonardo Leiderman, 2005. "Living with Dollarization and the Route to Dedollarization," Research Department Publications 4397, Inter-American Development Bank, Research Department.
  29. Eduardo Levy Yeyati, 2003. "Financial Dedollarization: A Carrot and Stick Approach," Business School Working Papers nueve, Universidad Torcuato Di Tella.
  30. Adolfo Barajas & Armando Méndez Morales, 2003. "Dollarization of Liabilities," IMF Working Papers 03/11, International Monetary Fund.
  31. Cowan, kevin & Quy-Toan Do, 2003. "Financial dollarization and central bank credibility," Policy Research Working Paper Series 3082, The World Bank.
  32. Honohan, Patrick & Shi, Anging, 2001. "Deposit dollarization and the financial sector in emerging economies," Policy Research Working Paper Series 2748, The World Bank.
  33. Martin Gonzalez Eiras, 2003. "Bank's Liquidity Demand in the Presence of a Lender of Last Resort," Working Papers 61, Universidad de San Andres, Departamento de Economia, revised Sep 2003.
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. Edmar L. Bacha & Márcio Holland & Fernando M. Gonçalves, 2007. "Is Brazil Different? Risk, Dollarization, And Interest In Emerging Markets," Anais do XXXV Encontro Nacional de Economia [Proceedings of the 35th Brazilian Economics Meeting] 028, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  2. Mercedes Garcia-Escribano & Sebastian Sosa, 2011. "What is Driving Financial De-Dollarization in Latin America?," IMF Working Papers 11/10, International Monetary Fund.
  3. Carlos Eduardo León Rincón & Alejandro Reveiz Herault, 2008. "La dolarización financiera:Experiencia internacional y perspectivas para Colombia," BORRADORES DE ECONOMIA 004510, BANCO DE LA REPÚBLICA.
  4. Luis Carranza & José Enrique Galdón Sánchez & Javier Gómez Biscarri, . "The relationship between investment and large exchange rate depreciations in dollarized economies," Faculty Working Papers 01/08, School of Economics and Business Administration, University of Navarra.
  5. Nombulelo Duma, 2011. "Dollarization in Cambodia," IMF Working Papers 11/49, International Monetary Fund.
  6. García-Escribano, Mercedes, 2011. "Factores que impulsan la desdolarización en el Perú," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 21, pages 23-40.

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:imf:imfwpa:05/187. 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: (Jim Beardow) or (Hassan Zaidi).

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.