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La dolarización financiera: experiencia internacional y perspectivas para Colombia

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Listed:
  • Carlos E. León Rincón

    () (Banco de la República)

  • Alejandro Revéiz Herault

    () (Banco de la República)

Abstract

Currencies in developing countries are not freely convertible; they show higher inflation and volatility levels and show periods of sharp appreciation and depreciation. These characteristics not only are a challenge for economic authorities, but also call attention to their ability to fully comply with the functions of money. Colombia, despite its disciplined monetary background, has not escaped from occasional queries about the convenience of keeping the Colombian peso. Just a few countries have chosen to fully replace their local currency with a foreign one in order to assume the entire functions of domestic currency, but there are many economies which have permitted partial dollarization. Based on international experience and Colombia’s characteristics, this paper concludes that financial dollarization would be costly, with limited and merely potential benefits.

Suggested Citation

  • Carlos E. León Rincón & Alejandro Revéiz Herault, 2008. "La dolarización financiera: experiencia internacional y perspectivas para Colombia," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 10(18), pages 313-341, January-J.
  • Handle: RePEc:rei:ecoins:v:10:y:2008:i:18:p:313-341
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    References listed on IDEAS

    as
    1. Pelin Berkmen & Eduardo A. Cavallo, 2007. "Exchange Rate Policy and Liability Dollarization; An Empirical Study," IMF Working Papers 07/33, International Monetary Fund.
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    4. Eduardo Levy Yeyati & Alain Ize, 1998. "Dollarization of Financial Intermediation; Causes and Policy Implications," IMF Working Papers 98/28, International Monetary Fund.
    5. Eduardo J. J. Ganapolsky, 2003. "Optimal fear of floating: the role of currency mismatches and fiscal constraints," FRB Atlanta Working Paper 2003-31, Federal Reserve Bank of Atlanta.
    6. Eduardo Borensztein & Andrew Berg, 2000. "The Pros and Cons of Full Dollarization," IMF Working Papers 00/50, International Monetary Fund.
    7. Alain Ize & Eduardo Levy Yeyati, 2005. "Financial De-Dollarization: Is It for Real?," Business School Working Papers isitforreal, Universidad Torcuato Di Tella.
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    Citations

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    Cited by:

    1. Lya Paola Sierra Suárez & Diana Maribel Lozano Baquero, 2010. "¿Qué sabemos sobre la Dolarización y sus efectos en las Economías Latinoamericanas que la adoptaron?," REVISTA FACULTAD DE CIENCIAS ECONÓMICAS, UNIVERSIDAD MILITAR NUEVA GRANADA, June.
    2. Tobal Martín, 2017. "Currency Mismatch in the Banking Sector in Latin America and the Caribbean," Working Papers 2017-05, Banco de México.
    3. Martín Tobal, 2013. "Currency Mismatch: New Database and Indicators for Latin America and the Caribbean," Documentos de Investigación - Research Papers 12, Centro de Estudios Monetarios Latinoamericanos, CEMLA.

    More about this item

    Keywords

    financial dollarization; partial dollarization; foreign exchange risk; balance sheet effect;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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