Financial Dollarization Equilibria A Framework for Policy Analysis

Rapidly rising dollarization and numerous related financial crises in recent years have heightened the need for policy action. This paper contributes to the policy debate by presenting a common analytic framework that examines the roots of de facto financial dollarization under different economic en...

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Bibliographic Details
Main Author: Ize, Alain
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2005
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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300 |a 30 pages 
651 4 |a United States 
653 |a Government and the Monetary System 
653 |a Payment Systems 
653 |a Dollarization 
653 |a Currency; Foreign exchange 
653 |a Monetary economics 
653 |a Regimes 
653 |a Value of Firms 
653 |a Money 
653 |a Foreign Exchange 
653 |a Standards 
653 |a Market risk 
653 |a Financial risk management 
653 |a Credit risk 
653 |a Capital and Ownership Structure 
653 |a Goodwill 
653 |a Banks and Banking 
653 |a Currencies 
653 |a Monetary Systems 
653 |a Monetary policy 
653 |a Financial Risk and Risk Management 
653 |a Exchange rates 
653 |a Financing Policy 
653 |a Money and Monetary Policy 
653 |a Financial services law & regulation 
653 |a Foreign exchange 
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520 |a Rapidly rising dollarization and numerous related financial crises in recent years have heightened the need for policy action. This paper contributes to the policy debate by presenting a common analytic framework that examines the roots of de facto financial dollarization under different economic environments and analyzes its interplay with monetary and prudential policies. In addition to providing a systematic analysis of the existence, stability, and multiplicity of dollarization equilibria, the paper makes a few novel contributions. In particular, it stresses the key role played by monetary policy endogeneity and identifies the underlying determinants of the peso premium that are responsible for inducing a preference for the dollar in financial transactions