Dollarization And Exchange Rate Fluctuations

Although the worldwide growth in dollarization of bank deposits has recently slowed, it has already reached very high levels in dozens of countries. Building on earlier findings that allowed the main cross-country variations in the share of dollars to be explained in terms of national policies and i...

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Main Author: Honohan, Patrick
Format: eBook
Language:English
Published: Washington, D.C The World Bank 2007, 2007
Subjects:
Online Access:
Collection: World Bank E-Library Archive - Collection details see MPG.ReNa
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245 0 0 |a Dollarization And Exchange Rate Fluctuations  |c Honohan, Patrick 
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300 |a Online-Ressource (1 online resource (24 p.)) 
653 |a Bank Deposits 
653 |a Bank Policy 
653 |a Central Bank 
653 |a Central Banks 
653 |a Currencies and Exchange Rates 
653 |a Currency 
653 |a Debt Markets 
653 |a Depositors 
653 |a Emerging Markets 
653 |a Exchange 
653 |a Exchange Rate 
653 |a Exchange Rate Movements 
653 |a Exchange Rates 
653 |a Finance and Financial Sector Development 
653 |a Holding 
653 |a Inflation 
653 |a Private Sector Development 
700 1 |a Honohan, Patrick 
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520 |a Although the worldwide growth in dollarization of bank deposits has recently slowed, it has already reached very high levels in dozens of countries. Building on earlier findings that allowed the main cross-country variations in the share of dollars to be explained in terms of national policies and institutions, this paper turns to analysis of short-run variations, particularly the response of dollarization to exchange rate changes, which is shown to be too small to warrant "fear of floating" by dollarized economies. But high dollarization is shown to increase the risk of depreciation and even suspension, as indicated by interest rate spreads. While specific policy is needed to deal with the risks associated with dollarization, the underlying causes of unwanted dollarization should also be tackled