A simple theoretical framework for the analysis of liability dollarization
This paper presents a simple model of debt contracts in order to analyze the conditions under which domestic residents would choose to denominate debts in ``dollars''. In the model, borrowers are producers of non-traded goods, and subject to shocks on prices. The real exchange rate varies in response to real shocks. There is a domestic unit of account; prices in terms of that unit can be shocked by a (presumably policy - induced) disturbance. Debt obligations can be denominated in either traded goods (dollarized contracts) or local currency. When real and nominal shocks are possitively correlated, dollarized contracts tend to be preferable to (non-contingent) nominal contracts when nominal shocks are large and real shocks are small
|Date of creation:||11 Aug 2004|
|Date of revision:|
|Contact details of provider:|| Phone: 1 212 998 3820|
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/pastmeetings.asp
More information through EDIRC
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.:
- Olivier Jeanne, 2003.
"Why Do Emerging Economies Borrow in Foreign Currency?,"
IMF Working Papers
03/177, International Monetary Fund.
- Jeanne, Olivier, 2003. "Why Do Emerging Economies Borrow in Foreign Currency?," CEPR Discussion Papers 4030, C.E.P.R. Discussion Papers.
- Guillermo A. Calvo & Carmen M. Reinhart, 2000.
"Fear of Floating,"
NBER Working Papers
7993, National Bureau of Economic Research, Inc.
- Ize, Alain & Yeyati, Eduardo Levy, 2003. "Financial dollarization," Journal of International Economics, Elsevier, vol. 59(2), pages 323-347, March.
- Christian Broda & Eduardo Levy Yeyati, 2003.
"Endogenous deposit dollarization,"
160, Federal Reserve Bank of New York.
- Alain Ize & Eric Parrado, 2002. "Dollarization, Monetary Policy, and the Pass-Through," IMF Working Papers 02/188, International Monetary Fund.
- Fischer, Stanley, 1975. "The Demand for Index Bonds," Journal of Political Economy, University of Chicago Press, vol. 83(3), pages 509-34, June.
When requesting a correction, please mention this item's handle: RePEc:ecm:latm04:120. 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: (Christopher F. Baum)
If references are entirely missing, you can add them using this form.