{
  "title": "Revisiting the Concept of Dollarization: The Global Financial Crisis and Dollarization in Low-Income Countries",
  "publication": "IMF Working Papers, January 22, 2015",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/revisiting-the-concept-of-dollarization-the-global-financial-crisis-and-dollarization-in-low-42616",
  "canonical": "https://www.imf.org/en/publications/wp/issues/2016/12/31/revisiting-the-concept-of-dollarization-the-global-financial-crisis-and-dollarization-in-low-42616",
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  "summary": "The economic literature has examined deposit dollarization in nominal terms, typically focusing on the ratio of foreign currency deposits to broad money.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Paper proposes a new approach to measuring dollarization that removes exchange rate effects affecting nominal deposit dollarization ratios.\n- Focus period for crisis analysis: 2006–09.\n- Key contrast: while dollarization in nominal terms surged during the recent global financial crisis, there was a downward trend in real terms."
    },
    {
      "heading": "Measurement approach",
      "content": "- Standard literature measures deposit dollarization in nominal terms as the ratio of foreign currency deposits to broad money.\n- New measure introduced: adjusts dollarization metrics to remove exchange rate movements so that foreign-currency-denominated demand by private agents is tracked in real foreign-currency terms rather than being affected mechanically by exchange rate fluctuations.\n- Demonstrated result: beyond the variance of inflation and depreciation, the level of inflation and size of depreciation also matter for dollarization."
    },
    {
      "heading": "Empirical findings",
      "content": "- Nominal dollarization:\n  - Surged during the recent global financial crisis.\n- Real (exchange‑rate adjusted) dollarization:\n  - Displayed a downward trend over the same period.\n- Drivers and moderating factors:\n  - Exchange rate appreciation moderates dollarization.\n  - Reductions in sovereign risk moderate dollarization.\n  - Global volatility’s estimated effect on dollarization has low statistical significance in many specifications.\n- Impulse-response analysis:\n  - Estimated impulse-response functions point to a large but short-lived positive impact of global volatility on dollarization, consistent with heightened concerns about spillover effects of global uncertainty on the domestic economy."
    },
    {
      "heading": "Econometric analysis",
      "content": "- Methods:\n  - Employs a set of econometric estimators, including GMM and impulse response techniques, to investigate whether “real” dollarization during 2006–09 was associated with the crisis.\n- Tested roles of:\n  - Initial macroeconomic conditions.\n  - Quality of institutions.\n  - Risk aversion.\n  - Prudential measures.\n- Statistical significance:\n  - Effects of global volatility are generally of low statistical significance, possibly because global shocks tend to preserve relative attractiveness of foreign assets."
    },
    {
      "heading": "Key statistics and publication metadata",
      "content": "- Analysis period highlighted: 2006–09.\n- Pages: 31\n- Volume: 2015\n- Issue: 012\n- Series: Working Paper No. 2015/012\n- DOI: https://doi.org/10.5089/9781484366912.001\n- ISBN: 9781484366912\n- Authors: Nkunde Mwase, Francis Y Kumah\n- Publication date shown: January 22, 2015\n\nIMF Working Paper — \"Revisiting the Concept of Dollarization: The Global Financial Crisis and Dollarization in Low-Income Countries\" by Nkunde Mwase and Francis Y Kumah.\n\n---\n\n Content in this bundle\n\n- wp1512\n  - wp1512 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp1512 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/revisiting-the-concept-of-dollarization-the-global-financial-crisis-and-dollarization-in-low-42616"
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    "Authors: Nkunde Mwase, Francis Y Kumah",
    "Published: January 22, 2015",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781484366912.001",
    "Paper proposes a new approach to measuring dollarization that removes exchange rate effects affecting nominal deposit dollarization ratios.",
    "Focus period for crisis analysis: 2006–09.",
    "Key contrast: while dollarization in nominal terms surged during the recent global financial crisis, there was a downward trend in real terms.",
    "Standard literature measures deposit dollarization in nominal terms as the ratio of foreign currency deposits to broad money.",
    "New measure introduced: adjusts dollarization metrics to remove exchange rate movements so that foreign-currency-denominated demand by private agents is tracked in real foreign-currency terms rather than being affected mechanically by exchange rate fluctuations.",
    "Demonstrated result: beyond the variance of inflation and depreciation, the level of inflation and size of depreciation also matter for dollarization.",
    "Nominal dollarization:",
    "Real (exchange‑rate adjusted) dollarization:",
    "Drivers and moderating factors:",
    "Impulse-response analysis:",
    "Methods:",
    "Tested roles of:",
    "Statistical significance:",
    "Analysis period highlighted: 2006–09.",
    "Pages: 31",
    "Volume: 2015",
    "Issue: 012",
    "Series: Working Paper No. 2015/012",
    "DOI: https://doi.org/10.5089/9781484366912.001",
    "ISBN: 9781484366912",
    "Authors: Nkunde Mwase, Francis Y Kumah",
    "Publication date shown: January 22, 2015",
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