Financial Dollarization, the portfolio approach and expectations: evidence for Latin America (1995-2005)
The aim of this research is to evaluate to what extent the actual level and dynamics of financial dollarization prevalent in Latin America can be explained by the portfolio approach proposed by Ize and Levi Yeyati (2003). Inasmuch as the result of a portfolio optimization is sensible to the estimation of the variance-covariance matrix, this paper considers several alternatives to estimate the expected volatility by means of historical data so as to resemble two polar cases: short-memory and long-memory adaptive expectations. The main finding is that, for the period 1995-2005, financial dollarization in Latin America can be partially explained by the MVP ratio only if long-memory of past volatility events is assumed. Additional results are reported for highly dollarized countries.
|Date of creation:||Oct 2006|
|Date of revision:|
|Contact details of provider:|| Postal: Jr. Miro Quesada 441, Lima|
Phone: 427-6250 ext. 3841
Web page: http://www.bcrp.gob.pe
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.:
- Arturo Galindo & Leonardo Leiderman, 2005.
"Living with Dollarization and the Route to Dedollarization,"
Research Department Publications
4397, Inter-American Development Bank, Research Department.
- Arturo Galindo & Leonardo Leiderman, 2005. "Living with Dollarization and the Route to Dedollarization," IDB Publications (Working Papers) 6690, Inter-American Development Bank.
- Winkelried, Diego & Castillo, Paul, 2010.
"Dollarization persistence and individual heterogeneity,"
Journal of International Money and Finance,
Elsevier, vol. 29(8), pages 1596-1618, December.
- Paul Castillo & Diego Winkelried, 2007. "Dollarization Persistence and Individual Heterogeneity," Working Papers 2007-004, Banco Central de Reserva del Perú.
- Paul Castillo & Diego Winkelried, 2005. "Dollarization Persistence and Individual Heterogeneity," Macroeconomics 0512014, EconWPA, revised 31 Dec 2005.
- Ize, Alain & Yeyati, Eduardo Levy, 2003. "Financial dollarization," Journal of International Economics, Elsevier, vol. 59(2), pages 323-347, March.
- Mark Zelmer & Andrea Schaechter & Mark R. Stone & Alina Carare, 2002. "Establishing Initial Conditions in Support of Inflation Targeting," IMF Working Papers 02/102, International Monetary Fund.
- Uribe, Martin, 1997.
"Hysteresis in a simple model of currency substitution,"
Journal of Monetary Economics,
Elsevier, vol. 40(1), pages 185-202, September.
- Martin Uribe, 1995. "Hysteresis in a simple model of currency substitution," International Finance Discussion Papers 509, Board of Governors of the Federal Reserve System (U.S.).
- Reinhart, Carmen & Calvo, Guillermo, 2002.
"Fear of floating,"
14000, University Library of Munich, Germany.
When requesting a correction, please mention this item's handle: RePEc:rbp:wpaper:2006-010. 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: (Research Unit)
If references are entirely missing, you can add them using this form.