Download or read book The Monetary Transmission in Dollarized and Non Dollarized Economies written by Mr.Santiago Acosta Ormaechea and published by International Monetary Fund. This book was released on 2011-04-01 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper conducts a comparative study of the monetary policy transmission in two economies that run a well-established IT regime, Chile and New Zealand, vis-à-vis two economies operating under relatively newer IT regimes, and which are exposed to a significant degree of dollarization, Peru and Uruguay. It is shown that the traditional interest rate channel is effective in Chile and New Zealand. For Peru and Uruguay, the exchange rate channel is instead more relevant in the transmission of monetary policy. This latter result follows from the limited impact of the policy rate in curbing inflationary pressures in these two countries, in combination with the fact that they have a relatively large and persistent exchange rate pass through. Finally, it is shown that the on-going de-dollarization process of Peru and Uruguay has somewhat strengthened their monetary transmission through the interest rate channel.
Download or read book Monetary Transmission in Dollarized and Non dollarized Economies written by Santiago Acosta-Ormaechea and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Inflation Targeting in Dollarized Economies written by Leonardo Leiderman and published by . This book was released on 2006 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: The shift to inflation targeting has contributed to the relatively low inflation observed in some emerging market economies although, as noted by many economists, the preconditions required for a successful implementation were not in place. The existence of managed exchange rate regimes, a narrow base of domestic nominal financial assets, the lack of market instruments to hedge exchange rate risks, together with fear of floating and dollarization, have been stressed as factors that might weaken the efficacy of monetary policy. By examining various aspects of monetary transmission and policy formulation in two highly dollarized economies (Peru and Bolivia) vis-à-vis two economies with low levels of dollarization (Chile and Colombia), we found that, while dollarization imposes differences in both the transmission capacity of monetary policy and its impact on real and financial sectors, it does not preclude the use of inflation targeting as a policy regime.
Download or read book Monetary Policy Transmission in Emerging Markets and Developing Economies written by Mr.Luis Brandao-Marques and published by International Monetary Fund. This book was released on 2020-02-21 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: Central banks in emerging and developing economies (EMDEs) have been modernizing their monetary policy frameworks, often moving toward inflation targeting (IT). However, questions regarding the strength of monetary policy transmission from interest rates to inflation and output have often stalled progress. We conduct a novel empirical analysis using Jordà’s (2005) approach for 40 EMDEs to shed a light on monetary transmission in these countries. We find that interest rate hikes reduce output growth and inflation, once we explicitly account for the behavior of the exchange rate. Having a modern monetary policy framework—adopting IT and independent and transparent central banks—matters more for monetary transmission than financial development.
Download or read book Monetary Integration and Dollarization written by Matias Vernengo and published by Edward Elgar Publishing. This book was released on 2006-01-01 with total page 319 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book brings together an impressive and diverse group of authors to discuss its central theme: whether or not the dollarized international monetary system is sustainable in the context of the global economy it helped create. In addition to its uniquely well-rounded and comprehensive coverage of the issues, this lively and highly readable volume provides an accurate assessment of the lack of consensus in the current debate. A must read for anyone interested in currency crises and the increasing vulnerability of the dollar. Jane D Arista, Director of Progams, Financial Markets Center, US This book deals with the economic consequences of monetary integration, which has long been dominated by the Optimal Currency Area (OCA) paradigm. In this model, money is perceived as having developed from a private sector cost minimization process to facilitate transactions. Not surprisingly, the book argues, the main advantage of monetary integration in the OCA context is the reduction of transaction costs, yet the validity of OCA to analyze processes of monetary integration seems to be limited at best. The contributors in this volume try to go beyond the OCA model and understand the political economy of monetary integration by comparing the European Monetary Union with the dollarization (formal and informal) process in Latin America. The contributors, many of whom are leading lights, reflect the disagreements and the changing views on the proper monetary arrangements in a globalized world and suggest that monetary integration and dollarization are not the solution for the great majority of countries around the world. Monetary Integration and Dollarization brings together mainstream and heterodox views of monetary integration and uses the European and North American experiences as a guide for the discussion of dollarization in developing countries. It will appeal to scholars, researchers and policy makers in the fields of financial and international economics.
Download or read book Escaping the Financial Dollarization Trap The Role of Foreign Exchange Intervention written by Paul Castillo and published by International Monetary Fund. This book was released on 2024-06-21 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial dollarization is considered a source of macroeconomic instability in many emerging economies. Dollarization constrains the ability of central banks to stimulate output during economic downturns. In contrast to the conventional monetary transmission mechanism, a monetary policy loosening in a dollarized economy leads to a currency depreciation, adverse balance sheet effects, and a contraction in investment and output growth. In this paper we evaluate the role of foreign exchange reserves in facilitating macroeconomic stabilization in a financially dollarized economy. We first show empirically that foreign exchange intervention in response to capital outflows can largely reduce the volatility of output and the real exchange rate in dollarized economies. We then develop a small open economy model with foreign currency debt and balance sheets effects. Our quantitative model shows that an active foreign exchange intervention policy is sufficient for offsetting the output volatility associated with financial dollarization. These results can explain the prevalence of low macroeconomic volatility in some dollarized economies (Christiano et al., 2021) and they highlight the role of foreign exchange reserves in reducing the welfare costs of dollarization.
Download or read book Monetary Policy in Dollarized Economies written by Mr.Adam Bennett and published by International Monetary Fund. This book was released on 1999-03-15 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Causes and Problems of Dollarization written by Fabio Botta and published by GRIN Verlag. This book was released on 2020-06-23 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2020 in the subject Economics - Foreign Trade Theory, Trade Policy, grade: 1,3, University of Leipzig (Institute for Economic Policy), course: Financial Development and Innovation in Developing Countries and Emerging Markets, language: English, abstract: This paper discusses the causes and problems associated with dollarization. Based on the results, it addresses the questions of how high dollarization rates can be evaluated and, in particular, whether it is advisable to opt for full dollarization (FD) or to what extent policymakers should rather aim for de-dollarization. As an introduction to the discussion, Chapter 2 will give a short illustration of the theoretical concepts of dollarization. Chapter 3 will then explain the causes of dollarization. The subsequent description of the advantages of FD in Chapter 4, which can also be cited as a reason for high rates of dollarization,3 leads directly to the problems associated with dollarization in Chapter 5. These problems arise – unless otherwise stated – both from high dollarization rates and from FD. The research up to Chapter 5 concentrates on a more theoretical level. The discussion on how to evaluate the causes and problems in Chapter 6 tries to link theoretical concepts with more general empirical analyses. Chapter 7 provides a brief conclusion of the most important findings and concludes with recommendations for future research. “Dollarization has evolved as one of the noteworthy features of globalization during the last two decades.” Although Mr. Yilmaz, the then Governor of the Central Bank of the Republic of Turkey, said this sentence at a conference on dollarization in December 2006, it remains more relevant than ever. Due to the increasing integration of the international financial system, the lifting of restrictions on capital mobility and the growing volume of trade, the debate on dollarization met with a growing interest in the 1990s. Nonetheless, today's economic journals are still filled with new publications on dollarization.
Download or read book Implementing Official Dollarization written by Mr.Luis Ignacio Jácome and published by International Monetary Fund. This book was released on 2010-04-01 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book The Dollarization Debate written by Dominick Salvatore and published by Oxford University Press, USA. This book was released on 2003 with total page 491 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book takes a global approach to one of today's most controversial topics in business: Dollarization. With the collapse of the former Soviet Union, and the formation of the Euro in Europe, many countries are debating whether or not a common currency is in their best interest. This intriguing volume brings together the leading participants in the current dollarization debates.
Download or read book Dollarization written by Eduardo Levy Yeyati and published by MIT Press. This book was released on 2003 with total page 364 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Dollarization in Cambodia written by Ms.Nombulelo Duma and published by International Monetary Fund. This book was released on 2011-03-01 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: Over the past decade, Cambodia has become Asia’s most dollarized economy. In contrast, dollarization in neighboring Lao P.D.R., Mongolia, and Vietnam has been either declining or broadly stable. Somewhat paradoxically, growing dollarization in Cambodia has occurred against the backdrop of greater macroeconomic and political stability. The usual motive, currency substitution, does not appear to have been a factor. As the volume of dollars increased over the years, so has the volume of riel. A strong inward flow of dollars related to garments sector exports, tourism receipts, foreign direct investment, and aid, has benefitted the dollar based urban economy. The riel based rural economy has, however, lagged behind. Given international experience in de-dollarization, a carefully managed market based strategy, supported by a continued stable macroeconomic environment is essential for Cambodia’s de-dollarization.
Download or read book The Choice of Exchange Rate Regime and Monetary Target in Highly Dollarized Economies written by Eduardo Borensztein and published by International Monetary Fund. This book was released on 2000-02 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the implications of high degrees of dollarization for the choice of exchange rate regime and the information content of various monetary aggregates in developing countries. We conclude that a high degree of currency substitution argues for a more fixed exchange rate regime, while asset substitution may imply that either more rigid or more flexible regimes may be appropriate. We also ask whether the most informative monetary aggregates include dollar assets. Based on an analysis of five countries, we conclude inter alia that broader aggregates that include dollar assets perform better than those that do not.
Download or read book Dollarization in Transition economies written by Ratna Sahay and published by . This book was released on 1995 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Official Dollarization As a Monetary Regime written by Mr.Andrew Swiston and published by International Monetary Fund. This book was released on 2011-06-01 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines El Salvador’s transition to official dollarization by comparing aspects of this regime to the fixed exchange rate regime prevailing in the 1990s. Commercial bank interest rates are analyzed under an uncovered interest parity framework, and it is found that dollarization lowered rates by 4 to 5 percent by reducing currency risk. This has generated net annual savings averaging 1⁄2 percent of GDP for the private sector and 1⁄4 percent of GDP for the public sector (net of the losses from foregone seigniorage). Estimated Taylor rules show a strong positive association between Salvadoran output and U.S. Federal Reserve policy since dollarization, implying that this policy has served to stabilize economic activity more than it did under the peg and more than policy rates in Central American countries with independent monetary policy have done. Dollarization does not appear to have affected the transmission mechanism, as pass-through of monetary policy to commercial interest rates has been similar to pass-through under the peg and in the rest of Central America.
Download or read book Dedollarization written by Annamaria Kokenyne and published by International Monetary Fund. This book was released on 2010-08-01 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Full Dollarization written by Andrew Berg and published by International Monetary Fund. This book was released on 2000 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: Analyzes the costs and benefits of full dollarization, or the adoption by one country of another country's currency. Potential advantages include lower borrowing costs and deeper integration into world markets. But countries lose the ability to devalue, and become dependent on the U.S. Compares with currency board option.