Peru

Peru has successfully pursued a market-driven financial de-dollarization during the last decade.

Author: Ms.Mercedes Garcia-Escribano

Publisher: International Monetary Fund

ISBN: 9781455201808

Category: Business & Economics

Page: 28

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Peru has successfully pursued a market-driven financial de-dollarization during the last decade. Dollarization of credit and deposit of commercial banks - across all sectors and maturities - has declined, with larger declines for commercial credit and time and saving deposits. The analysis presented in this paper confirms that de-dollarization has been driven by macroeconomic stability, introduction of prudential policies to better reflect currency risk (such as the management of reserve requirements), and the development of the capital market in soles. Further de-dollarization efforts could focus on these three fronts. Given the now consolidated macroeconomic stability, greater exchange rate flexibility could foster de-dollarization; additional prudential measures could further discourage banks’ lending and funding in foreign currency; while further capital market development in domestic currency would help overall financial de-dollarization.
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What is Driving Financial De Dollarization in Latin America

In the last decade, a group of Latin American countries (Bolivia, Paraguay, Peru, and Uruguay) experienced a gradual, yet sustained decline in financial dollarization.

Author: Mr.Sebastian Sosa

Publisher: International Monetary Fund

ISBN: 9781455211883

Category: Business & Economics

Page: 23

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In the last decade, a group of Latin American countries (Bolivia, Paraguay, Peru, and Uruguay) experienced a gradual, yet sustained decline in financial dollarization. This paper documents the stylized facts and uses a standard VAR approach to examine the drivers of both deposit and credit de-dollarization. It finds that the exchange rate appreciation has been a key factor explaining deposit de-dollarization. The introduction of prudential measures to create incentives to internalize the risks of dollarization (including an active management of reserve requirement differentials), the development of a capital market in local currency, and de-dollarization of deposits have all contributed to a decline in credit dollarization. Continuing efforts on these fronts, while maintaining macroeconomic stability and strong fundamentals, would help deepening de-dollarization.
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Financial De Dollarization

We re-appraise the cross-country evidence on the dollarization of financial systems in emerging market economies.

Author: Mr.Luis Catão

Publisher: International Monetary Fund

ISBN: 9781475525762

Category: Business & Economics

Page: 25

View: 996

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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.
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Dollarization and De dollarization in Transitional Economies of Southeast Asia

This book sheds light on the dollarization trends of four transitional economies in Southeast Asia: Cambodia, Lao PDR, Myanmar, and Vietnam.

Author: Koji Kubo

Publisher: Springer

ISBN: 9783319577685

Category: Business & Economics

Page: 243

View: 918

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This book sheds light on the dollarization trends of four transitional economies in Southeast Asia: Cambodia, Lao PDR, Myanmar, and Vietnam. Moving beyond the tendency to focus on the Latin American experience of dollarization and prolonged high inflation, the chapters in this book compare how payment dollarization has been more persistent than other types of dollarization in this region due to network externalities. The book illustrates that dollarization started in the underdeveloped financial system in these countries and that dollarization interacted with financial development, which is in contrast to dollarization in Latin America. This project extends the frontiers of empirical studies on dollarization. It will be of interest to students, researchers and policy makers concerned with dollarization and economics in Southeast Asia.
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Financial De Dollarization

V. CONCLUSION We have presented new evidence of financial de-dollarization across a broad range of emerging market economies in the years preceding the ...

Author: Mr.Luis Catão

Publisher: International Monetary Fund

ISBN: 9781484341377

Category: Business & Economics

Page: 25

View: 259

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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.
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What is Driving Financial De Dollarization in Latin America

In the last decade, a group of Latin American countries (Bolivia, Paraguay, Peru, and Uruguay) experienced a gradual, yet sustained decline in financial dollarization.

Author: Ms. Mercedes Garcia-Escribano

Publisher: International Monetary Fund

ISBN: 9781455214846

Category: Business & Economics

Page: 23

View: 328

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In the last decade, a group of Latin American countries (Bolivia, Paraguay, Peru, and Uruguay) experienced a gradual, yet sustained decline in financial dollarization. This paper documents the stylized facts and uses a standard VAR approach to examine the drivers of both deposit and credit de-dollarization. It finds that the exchange rate appreciation has been a key factor explaining deposit de-dollarization. The introduction of prudential measures to create incentives to internalize the risks of dollarization (including an active management of reserve requirement differentials), the development of a capital market in local currency, and de-dollarization of deposits have all contributed to a decline in credit dollarization. Continuing efforts on these fronts, while maintaining macroeconomic stability and strong fundamentals, would help deepening de-dollarization.
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Financial De Dollarization Is It for Real

De facto (unofficial) dollarization, defined as the holding by residents of assets and liabilities denominated in a foreign currency, is a policy concern in an increasing number of developing economies.

Author: Alain Ize

Publisher: INTERNATIONAL MONETARY FUND

ISBN: 1451862067

Category:

Page: 31

View: 918

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De facto (unofficial) dollarization, defined as the holding by residents of assets and liabilities denominated in a foreign currency, is a policy concern in an increasing number of developing economies. This paper addresses the dollarization debate from this perspective, with the goal of setting the stage for a more detailed and focused discussion of whether de-dollarization should be a policy objective and, if so, how best to pursue this objective. We review existing theories of de facto dollarization and the extent to which they are supported by the available evidence, presents the main strategies for reform, and proposes a list of policy recommendations.
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De Dollarization

The dollar's status as the world's preeminent currency, together with the U.S. military, has underlain American power since World War II. In a sweeping review of one of the most seminal yet least noticed developments in international ...

Author: Anne Korin

Publisher:

ISBN: 168647959X

Category:

Page: 224

View: 922

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The dollar's status as the world's preeminent currency, together with the U.S. military, has underlain American power since World War II. In a sweeping review of one of the most seminal yet least noticed developments in international affairs, Gal Luft and Anne Korin describe how an emerging coalition of revisionist countries, rogue governments, techno-visionaries and sanctioned entities, buttressed by innovations like blockchain and 5G, are working to push the dollar off of its reserve currency throne.It would not be the first time. Preceding the dollar, five consecutive currencies, each belonging to a superpower of the time, ruled the markets. Each predominated for roughly 80-100 years, and as it tumbled to irrelevance it accelerated the decline of the empire behind it.Are we due for a rerun?The slow moving shift from the dollar may be the single most important factor determining the future of American power. Arresting this trend will require Americans to make tough choices.Luft and Korin are co-directors of the Washington, DC-based Institute for the Analysis of Global Security (IAGS).
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How to De Dollarize Financial Systems in the Caucasus and Central Asia

Dollarization rates in the Caucasus and Central Asia (CCA) region are among the highest in the world, with adverse consequences for macroeconomic stability, monetary policy transmission, and financial sector development.

Author: Mr. Sami Ben Naceur

Publisher: International Monetary Fund

ISBN: 9781513598345

Category: Business & Economics

Page: 21

View: 917

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Dollarization rates in the Caucasus and Central Asia (CCA) region are among the highest in the world, with adverse consequences for macroeconomic stability, monetary policy transmission, and financial sector development. Using dynamic panel data models, we find that foreign exchange deposits and loans in the CCA are mainly driven by volatile inflation and exchange rates, low financial depth, and asymmetric exchange rate policies biased toward depreciation. Although there is no unique formula for success, empirical studies and cross-country experiences suggest that credible monetary and exchange rate frameworks, low and stable inflation, and deep domestic financial markets are essential ingredients of any de-dollarization strategy. In implementation, policymakers need to consider proper sequencing of policies, effective communication as well as risks from potential financial disintermediation and instability, and/or capital flight.
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Financial Dollarization de dollarization and the Turkish Experience

This paper briefly discusses the causes and consequences of financial dollarization with special reference to the recent Turkish experience.

Author: Gokhan Yılmaz

Publisher:

ISBN: OCLC:957712612

Category:

Page:

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This paper briefly discusses the causes and consequences of financial dollarization with special reference to the recent Turkish experience. Most developing countries have a limited, unofficial form of dollarization, which makes them vulnerable to external shocks through currency mismatches. Financial dollarization can limit the scope of macroeconomic policies and cause fear of floating. Consequently, dedollarization policies are now shifting from a generally passive stance learning to live with it type approach to a more active stance such as carrot and stick approach. This paper also presents a composite financial dollarization index for Turkey along with a brief discussion of corporate sector debt dollarization. The recent Turkish experience towards endogenous dedollarization appears to be consistent with the view that dedollarization can also be viewed as a side effect of prudent fiscal and monetary policies. Although the dollarization composite index is on a decreasing trend, it is however still high. Therefore, an active dedollarization strategy associated with a sound macroeconomic policy stance should be considered to support the implementation of a Full Fledged Inflation Targeting Regime in the near future.
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Dollarization in Sub Saharan Africa

Dollarization is also present, prominently, in sub-Saharan Africa (SSA) where it remains significant and persistent at over 30 percent rates for both bank loans and deposits—although it has not increased significantly since 2001.

Author: Mr. Mauro Mecagni

Publisher: International Monetary Fund

ISBN: 9781513554365

Category: Business & Economics

Page: 75

View: 162

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Dollarization—the use of foreign currencies as a medium of exchange, store of value, or unit of account—is a notable feature of financial development under macroeconomically fragile conditions. It has emerged as a key factor explaining vulnerabilities and currency crises, which have long been observed in Latin America, parts of Asia, and Eastern Europe. Dollarization is also present, prominently, in sub-Saharan Africa (SSA) where it remains significant and persistent at over 30 percent rates for both bank loans and deposits—although it has not increased significantly since 2001. However, progress in reducing dollarization has lagged behind other regions and, in this regard, it is legitimate to ask whether this phenomenon is an important concern in SSA. This study fills a gap in the literature by analyzing these issues with specific reference to the SSA region on the basis of the evidence for the past decade.
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Dollarization

Theoretical and empirical analysis of de jure dollarization.

Author: Eduardo Levy Yeyati

Publisher: MIT Press

ISBN: 0262122502

Category: Business & Economics

Page: 341

View: 219

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Theoretical and empirical analysis of de jure dollarization.
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Republic of Belarus

This Selected Issues paper takes stock of the current level of dollarization, both in historic and international perspective.

Author: International Monetary Fund. European Dept.

Publisher: International Monetary Fund

ISBN: 9781484393963

Category: Business & Economics

Page: 9

View: 527

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Selected Issues
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Economic Policy in a Highly Dollarized Economy

The monetary authorities could in principle promote de - dollarization through the banking system . The lack of a lender of last resort , in conjunction ...

Author: International Monetary Fund

Publisher: International Monetary Fund

ISBN: 1589061896

Category: Business & Economics

Page: 40

View: 753

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This study examines the challenges and issues facing policymakers in highly dollarized economies. Focusing on Cambodia, which achieved almost complete dollarization during 1991-95, the authors review recent developments in the literature on dollarization and examine the costs and benefits of dollarization in Cambodia, including the ensuing macroeconomic policy implications. They carry out an econometric estimation of cash foreign currency circulation in Cambodia in order to gauge the degree of dollarization. In addition to this analysis, the authors present a short description of Cambodia’s economic, financial, and structural background.
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Causes and Problems of Dollarization

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.

Author: Fabio Botta

Publisher: GRIN Verlag

ISBN: 9783346187918

Category: Business & Economics

Page: 20

View: 204

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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.
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Financial Dollarization

This volume provides a rigorous and balanced perspective on the causes and implications of dollarization, and the basic policies and options to deal with it: the adaptation of the monetary and prudential frameworks, the development of local ...

Author: A. Armas

Publisher: Springer

ISBN: 9780230380257

Category: Business & Economics

Page: 337

View: 399

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This volume provides a rigorous and balanced perspective on the causes and implications of dollarization, and the basic policies and options to deal with it: the adaptation of the monetary and prudential frameworks, the development of local-currency substitutes, and the scope for limiting dollarization through administrative restrictions.
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Dollarization in Cambodia

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.

Author: Ms.Nombulelo Duma

Publisher: International Monetary Fund

ISBN: 9781455218936

Category: Business & Economics

Page: 25

View: 416

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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.
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Dollarization in Lebanon

The IMF Working Papers series is designed to make IMF staff research available to a wide audience.

Author: Mr.Johannes Mueller

Publisher: International Monetary Fund

ISBN: 9781451934618

Category: Business & Economics

Page: 50

View: 793

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The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
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How to De Dollarize Financial Systems in the Caucasus and Central Asia

Dollarization should eventually decline in response to confidencebuilding and ... CCA policymakers should be aware that successful de-dollarization takes ...

Author: Mr.Sami Ben Naceur

Publisher: International Monetary Fund

ISBN: 9781513507279

Category: Business & Economics

Page: 21

View: 468

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Dollarization rates in the Caucasus and Central Asia (CCA) region are among the highest in the world, with adverse consequences for macroeconomic stability, monetary policy transmission, and financial sector development. Using dynamic panel data models, we find that foreign exchange deposits and loans in the CCA are mainly driven by volatile inflation and exchange rates, low financial depth, and asymmetric exchange rate policies biased toward depreciation. Although there is no unique formula for success, empirical studies and cross-country experiences suggest that credible monetary and exchange rate frameworks, low and stable inflation, and deep domestic financial markets are essential ingredients of any de-dollarization strategy. In implementation, policymakers need to consider proper sequencing of policies, effective communication as well as risks from potential financial disintermediation and instability, and/or capital flight.
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