Financial Dollarization: The Policy Agenda

Books, July 25, 2006

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Financial Dollarization: The Policy Agenda

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Bibliographic details

• Authors: Adrián Armas, Eduardo Levy Yeyati, Alain Ize
• Published: July 25, 2006
• Series: Books
• DOI: https://doi.org/10.5089/9781403987594.071

Summary

• Financial (unofficial) dollarization is identified as a critical source of financial fragility in both developing and emerging economies.
• The volume provides a rigorous and balanced perspective on:
  • the causes and implications of dollarization;
  • the basic policies and options to address dollarization, including the adaptation of monetary and prudential frameworks, the development of local-currency substitutes, and administrative restrictions to limit dollarization.
• For purchasing information: http://www.palgrave.com/economics/imf/index.asp.

Key findings and themes

• Causes and implications of dollarization are analyzed to inform policy responses.
• Policy options assessed include:
  • adaptation of the monetary framework;
  • adaptation of the prudential framework;
  • development of local-currency substitutes to reduce reliance on foreign currency;
  • consideration of administrative restrictions to limit dollarization.

Policy recommendations and options (as presented)

• Adapt monetary frameworks to mitigate dollarization-driven vulnerabilities.
• Adapt prudential frameworks to account for currency mismatches and exposure.
• Promote development of local-currency substitutes to deepen domestic currency use.
• Evaluate scope and implications of administrative restrictions aimed at limiting dollarization.