Dollarization and Financial Development
Dollarization and Financial Development

Author: Mr.Geoffrey J Bannister

Publisher: International Monetary Fund

Published: 2018-09-11

Total Pages: 39

ISBN-13: 1484373367

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Despite significant strides in financial development over the past decades, financial dollarization, as reflected in elevated shares of foreign currency deposits and credit in the banking system, remains common in developing economies. We study the impact of financial dollarization, differentiating across foreign currency deposits and credit on financial depth, access and efficiency for a large sample of emerging market and developing countries over the past two decades. Panel regressions estimated using system GMM show that deposit dollarization has a negative impact on financial deepening on average. This negative impact is dampened in cases with past periods of high inflation. There is also some evidence that dollarization hampers financial efficiency. The results suggest that policy efforts to reduce dollarization can spur faster and safer financial development.

Financial Stability in Dollarized Economies
Financial Stability in Dollarized Economies

Author: Ms.Anne Marie Gulde

Publisher: International Monetary Fund

Published: 2004-06-15

Total Pages: 40

ISBN-13:

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The process of dollarization can take multiple forms, including when a country adopts the US dollar either as its predominant currency, or establishes a bicurrency system with the local currency. This publication examines how to establish an adequate supervisory and crisis management framework in dollarized economies, particularly when central banks and regulators may be constrained in the use of standard monetary and financial policy tools. It is based on a paper produced by the IMF Executive Board, as part of the policy development work conducted by the IMFs Monetary and Financial Systems Department.

Dollarization
Dollarization

Author: Eduardo Levy Yeyati

Publisher: MIT Press

Published: 2003

Total Pages: 364

ISBN-13: 9780262122504

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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.

Monetary Policy in Dollarized Economies
Monetary Policy in Dollarized Economies

Author: Mr.Adam Bennett

Publisher: International Monetary Fund

Published: 1999-03-15

Total Pages: 62

ISBN-13: 9781557757579

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Dollarization - the holding by residents of a substantial portion of their assets in foreign-currency-denominated assets- is a common feature of developing and transition economies, and therefore typical of many countries with IMF - supported adjustment programs. This paper analyzes policy issues that arise-and various monetary strategies that may be pursued- when the monetary sector is dollarized, and it considers the implications that dollarization has for the design of IMF programs.

Dedollarization
Dedollarization

Author: Annamaria Kokenyne

Publisher: International Monetary Fund

Published: 2010-08-01

Total Pages: 53

ISBN-13: 1455201715

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This paper provides a summary of the key policies that encourage dedollarization. It focuses on cases in which the authorities’ intention is to gain greater control of monetary policy and draws on the experiences of countries that have successfully dedollarized. Unlike previous work on the subject, this paper examines both macroeconomic stabilization policies and microeconomic measures, such as prudential regulation of the financial system. This study is also the first attempt to make extensive use of the foreign exchange regulation data reported in the IMF’s Annual Report on Exchange Arrangements and Exchange Restrictions. The main conclusion is that durable dedollarization depends on a credible disinflation plan and specific microeconomic measures.

Implementing Official Dollarization
Implementing Official Dollarization

Author: Mr.Luis Ignacio Jácome

Publisher: International Monetary Fund

Published: 2010-04-01

Total Pages: 33

ISBN-13: 1455200654

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This paper identifies key aspects that countries willing to officially dollarize must necessarily address. Based on country experiences, it discusses the critical institutional bases that are necessary to unilaterally introduce a new legal tender, describes the relevant operational issues to smooth the transition toward the use of the new currency, and identifies key structural reforms that are necessary to favor the sustainability over time of this monetary regime. The paper is aimed at providing preliminary guidance to policy makers and practitioners adopting official dollarization. The paper does not take a position on how appropriate this monetary arrangement is. Experiences from adopting dollarization in Ecuador, El Salvador, Kosovo, Montenegro, and Timor-Leste are illustrated briefly.

Portfolio Selection and Asset Pricing
Portfolio Selection and Asset Pricing

Author: Shouyang Wang

Publisher: Springer Science & Business Media

Published: 2012-12-06

Total Pages: 260

ISBN-13: 3642559344

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In our daily life, almost every family owns a portfolio of assets. This portfolio could contain real assets such as a car, or a house, as well as financial assets such as stocks, bonds or futures. Portfolio theory deals with how to form a satisfied portfolio among an enormous number of assets. Originally proposed by H. Markowtiz in 1952, the mean-variance methodology for portfolio optimization has been central to the research activities in this area and has served as a basis for the development of modem financial theory during the past four decades. Follow-on work with this approach has born much fruit for this field of study. Among all those research fruits, the most important is the capital asset pricing model (CAPM) proposed by Sharpe in 1964. This model greatly simplifies the input for portfolio selection and makes the mean-variance methodology into a practical application. Consequently, lots of models were proposed to price the capital assets. In this book, some of the most important progresses in portfolio theory are surveyed and a few new models for portfolio selection are presented. Models for asset pricing are illustrated and the empirical tests of CAPM for China's stock markets are made. The first chapter surveys ideas and principles of modeling the investment decision process of economic agents. It starts with the Markowitz criteria of formulating return and risk as mean and variance and then looks into other related criteria which are based on probability assumptions on future prices of securities.

Central Banking in Latin America
Central Banking in Latin America

Author: Mr.Luis Ignacio Jácome

Publisher: International Monetary Fund

Published: 2015-03-17

Total Pages: 57

ISBN-13: 1484303180

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This paper provides a brief historical journey of central banking in Latin America to shed light on the debate about monetary policy in the post-global financial crisis period. The paper distinguishes three periods in Latin America’s central bank history: the early years, when central banks endorsed the gold standard and coped with the collapse of this monetary system; a second period, in which central banks turned into development banks under the aegis of governments at the expense of increasing inflation; and the “golden years,” when central banks succeeded in preserving price stability in an environment of political independence. The paper concludes by cautioning against overburdening central banks in Latin America with multiple mandates as this could end up undermining their hard-won monetary policy credibility.

Financial De-Dollarization
Financial De-Dollarization

Author: Mr.Luis Catão

Publisher: International Monetary Fund

Published: 2016-04-26

Total Pages: 25

ISBN-13: 1484341376

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We re-appraise the cross-country evidence on the dollarization of financial systems in emerging market economies. Amidst striking heterogeneity of patterns across regions, we identify a broad global trend towards financial sector de-dollarization from the early 2000s to the eve of the global financial crisis of 2008–09. Since then, de-dollarization has broadly stalled or even reversed in many economies. Yet a few of them have continued to de-dollarize. This suggests that domestic factors are also important and interact with global factors. To gain insight into such an interaction, we examine the experience of Peru since the early 1990s and find that low global interest rates, low global risk-aversion, and high commodity prices have fostered de-dollarization. Domestic macro-prudential measures that raise the relative cost of domestic dollar loans and the introduction and adherence to inflation targeting have also been key.