Dollarization Dynamics
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Author | : Tomás E. Caravello |
Publisher | : |
Total Pages | : 0 |
Release | : 2023 |
Genre | : |
ISBN | : |
Download Dollarization Dynamics Book in PDF, Epub and Kindle
This study explores the consequences of dollarizing an economy with an initial dollar shortage. We show that the resulting transitional dynamics are tantamount to that of a "sudden stop": consumption of tradable goods fall, the real exchange rate depreciates abruptly by a discrete drop in domestic prices and wages followed by a gradual appreciation from positive inflation. With nominal rigidities the economy first falls into a recession. This is true even if all prices and wages are allowed to adjust flexibly on impact. The subsequent recovery in activity always "overshoots" the steady state: the non-tradable sector transitions from the initial recession to a boom, then asymptotes to its steady state.
Author | : Mr.Ravi Balakrishnan |
Publisher | : International Monetary Fund |
Total Pages | : 47 |
Release | : 2016-09-08 |
Genre | : Business & Economics |
ISBN | : 1475535155 |
Download U.S. Dollar Dynamics Book in PDF, Epub and Kindle
We investigate the drivers of dynamics of major U.S. FX bilaterals. We first construct a novel measure of FX risk premiums using Consensus exchange rate forecasts. We then use VAR analysis to show that (i) risk premium shocks play a key role in driving dynamics of the major U.S. FX bilaterals; (ii) longer-term interest differentials also matter, especially for the Canadian $ and the Euro; (iii) oil price shocks play a particularly important role for the Canadian $ (an oil exporter); and (iv) risk appetite shocks (e.g., VIX shocks) generally lead to U.S. dollar appreciation. The importance of risk premium and longer-term interest differential shocks fit well with a simple theoretical model and are supported by recent event studies.
Author | : Emilio Ocampo |
Publisher | : |
Total Pages | : 0 |
Release | : 2023 |
Genre | : |
ISBN | : |
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We analyze a recent paper that claims that dollarizing an economy in the presence of a "dollar shortage" will provoke an immediate sharp reduction in real output and welfare. We find many problems with the model that supports this conclusion: confusion about the nature of a dollar shortage and its practical implications, invalid assumptions, invariant calibration in the presence of a regime change and lack of empirical testing. In our opinion, the paper does not make a valuable contribution to the dollarization debate nor provide useful guidance to policymakers. The proposed model is based on unrealistic assumptions and its predictions are contradicted by the available evidence. A more promising and useful line of research would have been to investigate what happens to a dollarized economy in a scenario of exchange rate overshooting and how it compares in relation to other stabilization plans.
Author | : Zaid Jamal Albarzinji |
Publisher | : |
Total Pages | : 131 |
Release | : 2011 |
Genre | : Dollar, American |
ISBN | : |
Download Deposit Dollarization Dynamics in a Model of Network Externalities and Hysteresis Book in PDF, Epub and Kindle
Author | : Roberto Vicente Peñaloza Pesantes |
Publisher | : |
Total Pages | : 183 |
Release | : 2005 |
Genre | : Currency question |
ISBN | : |
Download Dollarization and Price Dynamics Book in PDF, Epub and Kindle
Author | : Eduardo Levy Yeyati |
Publisher | : MIT Press |
Total Pages | : 364 |
Release | : 2003 |
Genre | : Business & Economics |
ISBN | : 9780262122504 |
Download Dollarization Book in PDF, Epub and Kindle
Theoretical and empirical analysis of de jure dollarization. With the persistent instability of international financial markets, emerging economies are exploring new ways to reduce exposure to capital flow volatility. Some analysts argue that financially open economies are best served by more flexible regimes, while others argue in favor of extreme exchange rate regimes that have a strong commitment to a fixed parity or dispense with an independent currency. The successful launch of the euro has made more realistic the prospect of replacing a national currency with a strong foreign one. Recent examples include the adoption of the US dollar by Ecuador and El Salvador. The introduction of a foreign currency as sole legal tender, termed full (de jure) dollarization, has been the center of much political and academic debate. This book provides a comprehensive analysis of the issues from both theoretical and empirical perspectives. The topics discussed include the role of balance sheet effects, the linkage between currency risk and country risk, the impact of dollarization on trade, financial integration and credibility, the implications of dollarization for the lender of last resort, and the institutional and political economy aspects of dollarization.
Author | : Mr.Juan S Corrales |
Publisher | : International Monetary Fund |
Total Pages | : 45 |
Release | : 2019-01-22 |
Genre | : Business & Economics |
ISBN | : 1484395522 |
Download Financial Dollarization of Households and Firms: Does It Differ? Book in PDF, Epub and Kindle
Using a newly complied and extended database from International Financial Statistics, and applying different panel-regression techniques, this paper documents the evolution of households’ and firms’ dollarization over the past decade. We assess the macroeconomic determinants of dollarization for households and firms and explore differences between high and low-income countries. We find that households’ and firms’ dollarization in loans and deposits are weakly explained by the currency substitution model, except in low income countries, where inflation plays a significant role. Instead, market development variables such as financial deepening, access to external debt and FX finance as well as other market considerations are key to explain the dynamics of deposits and loans dollarization, regardless of the level of income.These factors can account for a significant fraction of the dollarization, but using a variance decomposition model, there is evidence that a non-negligible portion has yet to be explained. This suggests that there are key determinants for household and firm dollarization that are not fully captured by traditional macroeconomic explanatory variables.
Author | : Tomás E. Caravello |
Publisher | : |
Total Pages | : 0 |
Release | : 2023 |
Genre | : |
ISBN | : |
Download Chronicle of a Dollarization Foretold Book in PDF, Epub and Kindle
Author | : Luis Carranza |
Publisher | : |
Total Pages | : 44 |
Release | : 2008 |
Genre | : |
ISBN | : |
Download Exchange Rate and Inflation Dynamics in Dollarized Economies Book in PDF, Epub and Kindle
Author | : Patrick Honohan |
Publisher | : World Bank Publications |
Total Pages | : 52 |
Release | : 2003 |
Genre | : Banks and banking |
ISBN | : |
Download Dollarization of the Banking System Book in PDF, Epub and Kindle
De Nicolo, Honohan, and Ize assess the benefits and risks associated with dollarization of the banking system. The authors provide novel empirical evidence on the determinants of dollarization, its role in promoting financial development, and on whether dollarization is associated with financial instability. They find that: The credibility of macroeconomic policy and the quality of institutions are both key determinants of cross-country variations in dollarization. Dollarization is likely to promote financial deepening only in a high inflation environment. Financial instability is likely higher in dollarized economies. The authors discuss the implications of these findings for financial sector and monetary policies.