Macroeconomic Implications of Financial Dollarization: The Case of Uruguay

By Gaston Gelos, Alejandro Lopez Mejia, Marco A. Piñón-Farah

July 25, 2008

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Gaston Gelos, Alejandro Lopez Mejia, and Marco A. Piñón-Farah Macroeconomic Implications of Financial Dollarization: The Case of Uruguay, (USA: International Monetary Fund, 2008) accessed November 8, 2024

Summary

Uruguay has experienced a remarkable recovery since the 2002 crisis, supported by sound policies and favorable external conditions. With the framework put in place in 2002, Uruguay abandoned an exchange rate peg in favor of a free float, adoped a monetary regime initially based on money targets, improved financial prudential norms and supervision, and accumulated significant central bank reserves. Against this background, Uruguay now faces issues beyond those addressed to stabilize the economy. As the country pursues key postcrisis monetary and financial reforms, the analysis provided in this paper has a direct bearing on the ongoing efforts to move toward a fully fledged inflation-targeting regime and develop interest rates as monetary instruments, as well as on the preparedness of the financial system to deal with shocks, and the adequacy of current central bank reserves.

Subject: Bank credit, Bank deposits, Banking, Central banks, Emerging and frontier financial markets, Exchange rates, Financial markets, Financial services, Inflation, Money, Prices, Reserve positions

Keywords: Bank credit, Bank deposits, Bank lending channel, Caribbean, Central America, Deposit dollarization, Eastern Europe, Emerging and frontier financial markets, Global, Inflation, Inflation expectation, Monetary policy credibility, OP, Reserve positions, Sovereign spread

Publication Details

Pages:

81
Volume:

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DOI:

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Issue:

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Series:

Occasional Paper No. 2008/005
Stock No:

S263EA
ISBN:

9781589067271
ISSN:

0251-6365

Supplemental Resources

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