Financial De-Dollarization: Is it for Real?

IMF Working Papers, September 1, 2005

Source details

De facto (unofficial) dollarization is defined as the holding by residents of assets and liabilities denominated in a foreign currency.
The paper addresses the dollarization debate from the perspective of de facto dollarization, aiming to set the stage for a more detailed discussion of whether de-dollarization should be a policy objective and, if so, how to pursue it.
The paper:
- reviews existing theories of de facto dollarization and the extent to which they are supported by the available evidence,
- presents the main strategies for reform,
- proposes a list of policy recommendations.

The paper reviews existing theories of de facto dollarization (including terminology present in the source such as dollar intermediation, dollarization, dollarization cum fear, dollarization hysteresis, MVP dollarization).
The extent to which these theories are supported by the available evidence is examined (details of empirical evidence and model results are in the full paper).

The paper presents the main strategies for reform aimed at financial de-dollarization (strategies are outlined in the full paper).

The paper proposes a list of policy recommendations for pursuing de-dollarization as a policy objective (the full list is contained within the Working Paper).

Subject: Credit risk, Currencies, De-dollarization, Dollarization, Exchange rates, Financial regulation and supervision, Foreign exchange, Monetary policy, Money
Keywords: Credit risk, Currencies, De-dollarization, dollar intermediation, Dollarization, dollarization cum fear, dollarization hysteresis, Exchange rates, monetary management, Monetary policy, MVP dollarization, policy agenda, Prudential policy, WP