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Dollarization in Viet Nam

Author

Listed:
  • Andreas Hauskrecht

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

  • Nguyen Thanh Hai

    (GTZ, Hanoi, Vietnam)

Abstract

The paper maps the dollarization process in Vietnam since the beginning 1990s. We analyze the pros and cons of complete currency substitution. We discuss different forms and degrees of dollarization, and why some countries dollarized and others not. Further, the paper analyzes the case of partial dollarization, its implied risks for financial sector stability and the underlying dynamics of dollarization. Finally, we describe ways to reverse dollarization. The main conclusions are that dollarization is not a viable exchange rate regime option for Vietnam; furthermore, the current status of a partly dollarized economy poses considerable risks for financial sector stability and makes the country prone to exogenous shocks. The recent dollarization of banks’ loan portfolio has considerably increased systemic risk. The foreseeable opening of the Vietnamese economy will significantly increase the risks related to dollarization.

Suggested Citation

  • Andreas Hauskrecht & Nguyen Thanh Hai, 2004. "Dollarization in Viet Nam," Working Papers 2004-25, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    • Handle: RePEc:iuk:wpaper:2004-25
    as

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    File URL: http://kelley.iu.edu/riharbau/RePEc/iuk/wpaper/bepp2004-25-hauskrecht-hai.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Andreas Hauskrecht & Nhan Le, 2005. "Capital Account Liberalization for a Small, Open Economy," Working Papers 2005-13, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.

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