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Analyzing Balance Sheet Vulnerabilities in a Dollarized Economy

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Author Info

  • Andreas Billmeier
  • Johan Mathisen

Abstract

Balance-sheet analysis (BSA) complements traditional flow-oriented macroeconomic analysis by gauging mismatches in aggregate and sectoral balance sheets of an economy. Enabled by recent progress in data availability, this paper applies BSA to Georgia, focusing on currency mismatches. In reviewing developments over the last five years, the paper finds that the still-high level of dollarization continues to create financial vulnerabilities, but that the overall level of currency mismatch has fallen and that liquidity problems are unlikely, in part owing to a strengthening of sectoral buffers, hedges, and insurance against shocks. Policy recommendations include accumulating reserves, strengthening securities markets, enhancing banking supervision, and maintaining a flexible exchange rate.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/173.

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Length: 29
Date of creation: 01 Jul 2006
Date of revision:
Handle: RePEc:imf:imfwpa:06/173

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Related research

Keywords: Dollarization; Bank supervision; Flexible exchange rates; Exchange rate regimes; foreign currency; commercial banks; external debt; currency mismatches; central bank; currency mismatch; domestic currency; current account; public external debt; liquid foreign currency; external liabilities; currency risks; external borrowing; current account deficit; multilateral creditors; currency risk; public sector debt; currency debt; outstanding debt; external debt statistics; private external debt; repayments; public debt; debt service payments; short-term debt; debt statistics; debt stock; long-term external debt; foreign currency debt; international borrowing; central banks; public finances; domestic financing; foreign capital; foreign shareholders; liquid reserves; sovereign debt; commercial bank loans; commercial borrowing; external debt situation; public finance; credit systems; regulatory framework; debt situation; onlending; bilateral creditors; tax revenue; current account deficits; credit risks; foreign direct investment; private debt; external debt stock; government debt; tradable securities; direct investment; debt strategies; international finance; debt service; debt sustainability; private banks; reserve accumulation;

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References

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  1. Anthony J. Pellechio & Johan Mathisen, 2006. "Using the Balance Sheet Approach in Surveillance," IMF Working Papers 06/100, International Monetary Fund.
  2. Morris Goldstein & Philip Turner, 2004. "Controlling Currency Mismatches in Emerging Markets," Peterson Institute Press: All Books, Peterson Institute for International Economics, Peterson Institute for International Economics, number 373, July.
  3. Brad Setser & Nouriel Roubini & Christian Keller & Mark Allen & Christoph B. Rosenberg, 2002. "A Balance Sheet Approach to Financial Crisis," IMF Working Papers 02/210, International Monetary Fund.
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Cited by:
  1. Charles Amo Yartey, 2012. "Barbados," IMF Working Papers 12/31, International Monetary Fund.

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