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Fiscal consequences for Mexico of adopting the dollar

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  • Christopher A. Sims

Abstract

Dollarization implies a reduction in the menu of assets available to the government and to the private sector in managing risk. Whatever the gains from dollarization, the costs of reducing the asset menu need to be weighed against them. This paper presents models, one a simple generalization of a well-known model of tax smoothing by Barro, in which these costs are explicit. Along the way, it suggests that there is likely to be no reduction in interest costs to the government from dollarization.
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Suggested Citation

  • Christopher A. Sims, 2001. "Fiscal consequences for Mexico of adopting the dollar," Proceedings, Federal Reserve Bank of Cleveland, pages 597-625.
  • Handle: RePEc:fip:fedcpr:y:2001:p:597-625
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    References listed on IDEAS

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    1. James Heckman & Flavio Cunha, 2007. "The Technology of Skill Formation," American Economic Review, American Economic Association, vol. 97(2), pages 31-47, May.
    2. Diego Restuccia & Carlos Urrutia, 2004. "Intergenerational Persistence of Earnings: The Role of Early and College Education," American Economic Review, American Economic Association, pages 1354-1378.
    3. Elizabeth Caucutt & Lance Lochner, 2004. "Early and Late Human Capital Investments, Credit Constraints, and the Family," 2004 Meeting Papers 129, Society for Economic Dynamics.
    4. Cunha, Flavio & Heckman, James J. & Lochner, Lance, 2006. "Interpreting the Evidence on Life Cycle Skill Formation," Handbook of the Economics of Education, Elsevier.
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    Keywords

    Mexico ; Dollar; American;

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