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Coca Dollars and the Dollarization of South America

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  • Melvin, Michael
  • Ladman, Jerry

Abstract

A unique data set on the informal loan market in a coca-growing region of Bolivia is used to explore the hypothesis that the dollarization of this market is related to the coca industry. Implications are then drawn for other nations where coca or cocaine is an important industry. The authors find that loans are significantly more likely to be denominated in dollars in the season of the major coca harvest than at any other time of the year. The effects of the term and size of loans is consistent with the financial needs of the drug industry, which is highly dollarized. Copyright 1991 by Ohio State University Press.

Suggested Citation

  • Melvin, Michael & Ladman, Jerry, 1991. "Coca Dollars and the Dollarization of South America," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(4), pages 752-763, November.
  • Handle: RePEc:mcb:jmoncb:v:23:y:1991:i:4:p:752-63
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    Citations

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    Cited by:

    1. Mariya Hake & Fernando Lopez-Vicente & Luis Molina, 2014. "Do the Drivers of Loan Dollarization Differ between CESEE and Latin America? A Meta-Analysis," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 8-35.
    2. Michael Melvin & Bettina Peiers, 1996. "Dollarization In Developing Countries: Rational Remedy Or Domestic Dilemma?," Contemporary Economic Policy, Western Economic Association International, vol. 14(3), pages 30-40, July.
    3. Loviscek, Anthony L., 1996. "Seigniorage and the Mexican financial crisis," The Quarterly Review of Economics and Finance, Elsevier, vol. 36(1), pages 55-64.
    4. Dell'Erba, Salvatore & Saldías Zambrana, Martin, 2006. "Financial dollarization and currency substitution: an empirical study for Bolivia," Kiel Advanced Studies Working Papers 432, Kiel Institute for the World Economy (IfW).
    5. Yinusa, Dauda Olalekan, 2008. "Between dollarization and exchange rate volatility: Nigeria's portfolio diversification option," Journal of Policy Modeling, Elsevier, vol. 30(5), pages 811-826.
    6. Alberto Giovannini & Bart Turtelboom, 1992. "Currency Substitution," NBER Working Papers 4232, National Bureau of Economic Research, Inc.
    7. Peter L. Pedroni & Concha Verdugo Yepes, 2011. "The Relationship Between Illicit Coca Production and Formal Economic Activity in Peru," IMF Working Papers 11/182, International Monetary Fund.
    8. Kem Reat Viseth, 2001. "Currency Substitution and Financial Sector Developments in Cambodia," International and Development Economics Working Papers idec01-4, International and Development Economics.
    9. Kamin, Steven B. & Ericsson, Neil R., 2003. "Dollarization in post-hyperinflationary Argentina," Journal of International Money and Finance, Elsevier, vol. 22(2), pages 185-211, April.
    10. Sylviane Guillaumont Jeanneney, 1994. "La politique économique en présence de substitution de monnaies," Revue Économique, Programme National Persée, vol. 45(3), pages 349-368.

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