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Dollarization of the Banking System: Good or Bad?
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Author/Editor: |
De Nicoló, Gianni | Honohan, Patrick | Ize, Alain |
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July 1, 2003 |
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Electronic Access: |
Free Full Text (PDF file size is 1,603KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.
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Summary: This paper assesses the benefits and risks associated with dollarization of the banking system. We provide novel empirical evidence on the determinants of dollarization, its role in promoting financial development, and on whether dollarization is associated with financial instability. We find that: (a) the credibility of macroeconomic policy and the quality of institutions are both key determinants of cross-country variations in dollarization; (b) dollarization is likely to promote financial deepening only in a high inflation environment; and (c) financial instability is likely higher in dollarized economies. The implications of these findings for financial sector and monetary policies are discussed.
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Order a print copy
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Series: |
Working Paper No. 03/146 |
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Subject(s): |
Dollarization | Banking systems | Financial sector |
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Author's keyword(s): |
Dollarization | Financial Deepening | Financial Instability |
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Published: |
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July 1, 2003 |
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ISBN/ISSN: |
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1934-7073 |
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Format: |
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Paper |
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Stock No: |
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WPIEA1462003 |
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Pages: |
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43 |
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Price: |
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US$15.00 (Academic Rate: US$15.00 )
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