This paper builds a simple theoretical model designed to study dollarization. Each period, a benevolent government decides whether or not to dollarize, how much to borrow or lend on an international bond market, and, if dollarization has not occurred, the devaluation rate. In equilibrium, international borrowing is limited endogenously such that the government always chooses to repay when the p...

The most recent generation of currency and nancial crisis literature blames the borrowing decisions of real and nancial sector actors; in particular, it argues that the de facto dollarization of liabilities is inherently risky and can trigger a host of economic ills that impede economic development. This paper presents and tests an institutional theory of de facto nancial dollarization. It argu...

Liability dollarization of the domestic banking system represents a source of vulnerability for emerging market countries. The root cause is a lack of faith in the domestic currency, which ultimately stems from the belief that the government will not follow policies that promote longrun currency stability. This paper presents a model in which government myopia determines the unofficial dollariz...

At present, as the international monetary system is changing, it particularly important to choose between "dollarization" and "de-dollarization". In recent years, not difficult find through current politics other channels that Central Asian countries, one of regions with highest degree dollarization, are promoting relevant strategies Because accuracy research affected by many unpredictable inev...

This paper examines if dollarization has had a positive impact on the macroeconomic stability of Latin American countries. Dollarization refers to either the official or unofficial replacement of local currencies with the U.S. dollar. Currently four Latin American countries are officially dollarized and the rest experience varying levels of unofficial dollarization. Data from the World Bank Wor...

Fiscal considerations and commitment drive the choice of monetary policy regime, especially for developing countries. I survey the fiscal foundations of price determination, and study the maximize-inflation-tax, interest rate rule, peg and currency board, and dollarization regime. Since nominal debt acts like equity for the government, the dollarization question is like the question whether a f...

This paper builds a simple theoretical model designed to study dollarization. Each period, a benevolent government decides whether or not to dollarize, how much to borrow or lend on an international bond market, and, if dollarization has not occurred, the devaluation rate. In equilibrium, international borrowing is limited endogenously such that the government always chooses to repay when the p...

This paper examines how dollarization affects wages and employment in the Mexican labor market. Dollarization is modeled as a fixed real exchange rate and also as a potentially increased inflow of capital from abroad. The effects of dollarization depend upon whether adopting a fixed exchange rate reduces the rate of return on emigration and helps to attract foreign capital. The paper investigat...

It has been argued that (official) dollarization facilitates financial integration and a better performance of the domestic banking system. However, before adopting dollarization it is necessary a deep discussion on the pros and cons of this scheme. With a few exceptions, the advantages of dollarization have not been discussed in a dynamic general equilibrium framework, especially for partially...

•= Policy credibility Countries where policy makers have historically suffered from a lack of policy credibility, especially in the monetary area, may benefit from the discipline imposed by a rule-based monetary regime such as a currency board or dollarization. The inability of discretionary policy makers to credibly commit to monetary stability and discipline has been suggested as one of the s...