Unofficial Dollarization in Latin America: Currency Substitution, Network Externalities and Irreversibility
AbstractWe examine the extent, causes and consequences of the use of foreign currency as a co-circulating medium of exchange and store of value in Latin America. Using new estimates of the amount of foreign currency in circulation in the form of US dollars, we obtain unique measures of currency substitution, asset substitution, dollarization, and bank credibility for many Latin American countries. We also specify and estimate demand functions for foreign currency in circulation in Argentina in order to examine the dynamic consequences of network externalities for hysteresis and irreversibility.
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Bibliographic InfoPaper provided by EconWPA in its series International Finance with number 0205002.
Length: 28 pages
Date of creation: 10 May 2002
Date of revision:
Note: Type of Document - Acrobat PDF; prepared on IBM PC ; to print on HP/PostScript; pages: 28 ; figures: included. Forthcoming in James W. Dean, Dominick Salvatore and Thomas Willett, eds. The Dollarization Debate, New York: Oxford University Press, 2002
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unofficial de facto dollarization; Latin America; currency substitution; asset substitution; foreign currency; network externalities; Argentina; irreversibility; underground economy;
Find related papers by JEL classification:
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- F3 - International Economics - - International Finance
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
- P2 - Economic Systems - - Socialist Systems and Transition Economies
- P3 - Economic Systems - - Socialist Institutions and Their Transitions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-06-13 (All new papers)
- NEP-IFN-2002-06-13 (International Finance)
- NEP-LAM-2002-06-13 (Central & South America)
- NEP-LAW-2002-06-13 (Law & Economics)
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