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Dollarization in Viet Nam

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Author Info

  • Andreas Hauskrecht

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

  • Nguyen Thanh Hai

    (GTZ, Hanoi, Vietnam)

Abstract

The paper maps the dollarization process in Vietnam since the beginning 1990s. We analyze the pros and cons of complete currency substitution. We discuss different forms and degrees of dollarization, and why some countries dollarized and others not. Further, the paper analyzes the case of partial dollarization, its implied risks for financial sector stability and the underlying dynamics of dollarization. Finally, we describe ways to reverse dollarization. The main conclusions are that dollarization is not a viable exchange rate regime option for Vietnam; furthermore, the current status of a partly dollarized economy poses considerable risks for financial sector stability and makes the country prone to exogenous shocks. The recent dollarization of banks’ loan portfolio has considerably increased systemic risk. The foreseeable opening of the Vietnamese economy will significantly increase the risks related to dollarization.

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File URL: http://www.bus.indiana.edu/riharbau/RePEc/iuk/wpaper/bepp2004-25-hauskrecht-hai.pdf
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Bibliographic Info

Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2004-25.

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Date of creation: 2004
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Handle: RePEc:iuk:wpaper:2004-25

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References

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  1. Eichengreen, Barry, 2001. "What problems can dollarization solve?," Journal of Policy Modeling, Elsevier, vol. 23(3), pages 267-277, April.
  2. Reinhart, Carmen & Calvo, Guillermo, 2001. "Reflections on Dollarization," MPRA Paper 8206, University Library of Munich, Germany.
  3. Sebastian Edwards, 2001. "Dollarization and Economic Performance: An Empirical Investigation," NBER Working Papers 8274, National Bureau of Economic Research, Inc.
  4. 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.
  5. Sebastian Edwards, 2002. "The Great Exchange Rate Debate after Argentina," Working Papers 74, Oesterreichische Nationalbank (Austrian Central Bank).
  6. Sebastian Edwards, 2002. "The Great Exchange Rate Debate After Argentina," NBER Working Papers 9257, National Bureau of Economic Research, Inc.
  7. Sebastian Edwards & Igal Magendzo, 2003. "A Currency of One's Own? An Empirical Investigation on Dollarization and Independent Currency Unions," NBER Working Papers 9514, National Bureau of Economic Research, Inc.
  8. Gianni De Nicoló & Patrick Honohan & Alain Ize, 2003. "Dollarization of the Banking System," IMF Working Papers 03/146, International Monetary Fund.
  9. Adalbert Winkler & Francesco Mazzaferro & Carolin Nerlich & Christian Thimann, 2004. "Official dollarisation/euroisation - motives, features and policy implications of current cases," Occasional Paper Series 11, European Central Bank.
  10. De Nicolo, Gianni & Honohan, Patrick & Ize, Alain, 2003. "Dollarization of the banking system : good or bad?," Policy Research Working Paper Series 3116, The World Bank.
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Cited by:
  1. Andreas Hauskrecht & Nhan Le, 2005. "Capital Account Liberalization for a Small, Open Economy," Working Papers 2005-13, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.

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