Banking and the political support for dollarization
In this paper we study dollarization as a commitment device that the Central Bank could use to avoid getting involved in an undesirable banking-sector bailout. We show how a political process could induce an equilibrium outcome that differs from the one that a benevolent Central Bank would want to implement. Dollarization then could be used to restore the economy to the benevolent outcome. In so doing though, political support for dollarization becomes essential. For our benchmark case, dollarization does not have enough support to be actually implemented. But when we study the interaction among dollarization, the introduction of international banks, and the political process, we find that bank internationalization may help to attain the necessary political support that can make dollarization a viable policy.
|Date of creation:||2000|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.richmondfed.org/|
More information through EDIRC
|Order Information:|| Web: http://www.richmondfed.org/publications/ Email: |
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.:
- Krusell, Per & Quadrini, Vincenzo & Rios-Rull, Jose-Victor, 1997. "Politico-economic equilibrium and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 243-272, January.
- Thomas F. Cooley & Vincenzo Quadrini, 2001.
"The costs of losing monetary independence: the case of Mexico,"
Federal Reserve Bank of Cleveland, pages 370-403.
- Cooley, Thomas F & Quadrini, Vincenzo, 2001. "The Cost of Losing Monetary Independence: The Case of Mexico," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(2), pages 370-97, May.
- Roberto Chang & Andres Velasco, 1998.
"The Asian Liquidity Crisis,"
NBER Working Papers
6796, National Bureau of Economic Research, Inc.
- Huberto M. Ennis, 2000. "Loanable Funds, Monitoring and Banking," Center for Financial Institutions Working Papers 00-21, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Francois R. Velde & Marcelo Veracierto, 1999.
"Dollarization in Argentina,"
Chicago Fed Letter,
Federal Reserve Bank of Chicago, issue Jun.
- Reinhart, Carmen & Kaminsky, Graciela, 1999.
"The twin crises: The causes of banking and balance of payments problems,"
14081, University Library of Munich, Germany.
- Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
- Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.).
- Peck, James & Shell, Karl, 2001.
"Equilibrium Bank Runs,"
01-10r, Cornell University, Center for Analytic Economics.
- Stephanie Schmitt-Grohe & Martin Uribe, 2000.
"Stabilization Policy and the Costs of Dollarization,"
Departmental Working Papers
200006, Rutgers University, Department of Economics.
- Schmitt-Grohe, Stephanie & Uribe, Martin, 2001. "Stabilization Policy and the Costs of Dollarization," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(2), pages 482-509, May.
- Stephanie Schmitt-Grohe & Martin Uribe, 2001. "Stabilization policy and the costs of dollarization," Proceedings, Federal Reserve Bank of Cleveland, pages 482-517.
- Velasco, Andres, 1987. "Financial crises and balance of payments crises : A simple model of the southern cone experience," Journal of Development Economics, Elsevier, vol. 27(1-2), pages 263-283, October.
- Preston J. Miller, 1983. "Budget deficit mythology," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
- Craig Burnside & Martin Eichenbaum & Sergio T. Rebelo, 2000.
"On the Fundamentals of Self-Fulfilling Speculative Attacks,"
NBER Working Papers
7554, National Bureau of Economic Research, Inc.
- Burnside, Craig & Eichenbaum, Martin & Rebelo, Sérgio, 2000. "On the Fundamentals of Self-Fulfilling Speculative Attacks," CEPR Discussion Papers 2565, C.E.P.R. Discussion Papers.
- Eduardo Borensztein & Andrew Berg, 2000. "The Pros and Cons of Full Dollarization," IMF Working Papers 00/50, International Monetary Fund.
- David T. Beers & Thomas J. Sargent & Neil Wallace, 1983. "Speculations about the speculation against the Hong Kong dollar," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
When requesting a correction, please mention this item's handle: RePEc:fip:fedrwp:00-12. 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: (William Perkins)
If references are entirely missing, you can add them using this form.