Money and Credit Under Currency Substitution

Author/Editor:

Carlos A. Rodriguez

Publication Date:

November 1, 1992

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

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. 92/99

Subject:

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

Format:

Paper

Pages:

18

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