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

Dollars, Debt and the IFIs: Dedollarizing Multilateral Lending

Contents:

Author Info

  • Eduardo Levy Yeyati

Abstract

Financial dollarization (FD) has been increasingly seen as a concern due to its negative impact on crisis propensity and output volatility, shifting the center of the FD debate towards a more proactive dedollarization stance. While often neglected, lending from International Financial Institutions (IFIs) is an important source of FD in emerging economies, and as such a dimension that cannot be overlooked by any dedollarization strategy. This paper revisits old and new arguments in favor of IFI lending in the local currency, and argues that any such initiative should rely, at least at an early stage, on the demand from residents in search for stable returns in units of the local consumption basket, but reluctant to take on sovereign risk. Due to their superior enforcement capacity, IFIs can intermediate these savings, currently invested in dollarized foreign assets, back into the local economy by offering investment grade local currency bonds and using the proceeds to dedollarize their own lending to non-investment grade countries, thereby contributing to reduce FD while fostering the development of local currency markets.

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.utdt.edu/departamentos/empresarial/cif/pdfs-wp/wpcif-112004.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Universidad Torcuato Di Tella in its series Business School Working Papers with number dedollmultlending.

as in new window
Length: 48 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:udt:wpbsdt:dedollmultlending

Contact details of provider:
Postal: Miñones 2177 - (1428) Buenos Aires
Web page: http://www.utdt.edu/listado_contenidos.php?id_item_menu=4994
More information through EDIRC

Related research

Keywords:

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. Guillermo A. Calvo & Alejandro Izquierdo & Luis-Fernando Mejia, 2004. "On the Empirics of Sudden Stops: The Relevance of Balance-Sheet Effects," NBER Working Papers 10520, National Bureau of Economic Research, Inc.
  2. Christian Broda & Eduardo Levy Yeyati, 2003. "Endogenous deposit dollarization," Staff Reports 160, Federal Reserve Bank of New York.
  3. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 1999. "Hedging and Financial Fragility in Fixed Exchange Rate Regimes," NBER Working Papers 7143, National Bureau of Economic Research, Inc.
  4. Eduardo Levy-Yeyati, 2004. "FINANCIAL DOLLARIZATION: Evaluating the consequences," Econometric Society 2004 Latin American Meetings 184, Econometric Society.
  5. Thomas, Lee R, 1985. "Portfolio Theory and Currency Substitution," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(3), pages 347-57, August.
  6. Eduardo Levy Yeyati & Maria Soledad Martinez Peria & Sergio Schmukler, 2004. "Market Discipline under Systemic Risk: Evidence from Bank Runs in Emerging Economies," Business School Working Papers systemicrisk, Universidad Torcuato Di Tella.
  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. 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.
  9. 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.
  10. Alicia Garcia Herrero & Juan Carlos Berganza, 2004. "What Makes Balance Sheet Effects Detrimental For The Country Risk Premium?," International Finance 0408002, EconWPA.
  11. 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.
  12. Olivier Jeanne & Jeromin Zettelmeyer, 2001. "International bailouts, moral hazard and conditionality," Economic Policy, CEPR & CES & MSH, vol. 16(33), pages 407-432, October.
  13. Eduardo Borensztein & Paolo Mauro, 2002. "Reviving the Case for GDP-Indexed Bonds," IMF Policy Discussion Papers 02/10, International Monetary Fund.
  14. Morris Goldstein & Philip Turner, 2004. "Controlling Currency Mismatches in Emerging Markets," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 373.
  15. Domac, Ilker & Martinez-Peria, Maria Soledad, 2000. "Banking crises and exchange rate regimes - Is there a link?," Policy Research Working Paper Series 2489, The World Bank.
  16. Ricardo J. Caballero & Stavros Panageas, 2003. "Hedging Sudden Stops and Precautionary Contractions," NBER Working Papers 9778, National Bureau of Economic Research, Inc.
  17. Luis J. Álvarez & Ignacio Hernando, 2004. "Price setting behaviour in Spain: stylised facts using consumer price micro data," Banco de Espa�a Working Papers 0422, Banco de Espa�a.
  18. Aghion, Philippe & Bolton, Patrick & Dewatripont, Mathias, 2000. "Contagious bank failures in a free banking system," European Economic Review, Elsevier, vol. 44(4-6), pages 713-718, May.
  19. Gianni De Nicoló & Patrick Honohan & Alain Ize, 2003. "Dollarization of the Banking System," IMF Working Papers 03/146, International Monetary Fund.
  20. Juan Carlos Berganza & Alicia García-Herrero, 2004. "What makes balance sheet effects detrimental for the country risk premium?," Banco de Espa�a Working Papers 0423, Banco de Espa�a.
  21. Aghion, Philippe & Bolton, Patrick & Dewatripont, Mathias, 2000. "Contagious bank failures in a free banking system," Scholarly Articles 12490629, Harvard University Department of Economics.
  22. Ize, Alain & Yeyati, Eduardo Levy, 2003. "Financial dollarization," Journal of International Economics, Elsevier, vol. 59(2), pages 323-347, March.
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. Barry Eichengreen, 2006. "Insurance Underwriter or Financial Development Fund: What Role for Reserve Pooling in Latin America?," NBER Working Papers 12451, National Bureau of Economic Research, Inc.
  2. Kevin Cowan & Eduardo Levy Yeyati & Ugo Panizza & Federico Sturzenegger, 2006. "Sovereign Debt In The Americas: New Data and Stylized Facts," Business School Working Papers 2006-09, Universidad Torcuato Di Tella.

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:udt:wpbsdt:dedollmultlending. 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: (Nicolás Del Ponte).

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.