Occasional Papers

Monetary Policy in Dollarized Economies

Author/Editor:

Adam Bennett ; Eduardo Borensztein ; Tomás J. T. Baliño

Publication Date:

March 15, 1999

Summary:

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.

Series:

Occasional Paper No. 1999/003

Subject:

Commercial banks Currencies Dollarization Financial institutions Monetary base Monetary policy Money Reserve requirements