Money and Credit Under Currency Substitution
Summary:
This paper examines the effects on the supply of money and credit of a repatriation of foreign assets in an economy subject to currency substitution. In the absence of 100 percent reserve requirements, such a change in the location of deposits, which is not compensated by an increase in money demand, induces a credit boom that works itself out through a transitory current account deficit and real currency appreciation. These results are illustrated with data from the recent experience in Argentina and Peru where local banks have been authorized to capture dollar deposits from residents.
Series:
Working Paper No. 1992/099
Subject:
Balance of payments Capital inflows Credit Currencies Demand for money Monetary policy Money Reserve requirements
Notes:
Examines the effects on the supply of money and credit of a repatriation of foreign assets in an economy subject to currency substitution. Also published in Staff Papers, Vol. 40, No. 2, June 1993.
English
Publication Date:
November 1, 1992
ISBN/ISSN:
9781451852196/1018-5941
Stock No:
WPIEA0991992
Pages:
18
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