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Dollarization of Financial Intermediation :, Causes and Policy Implications, Eduardo Levy Yeyati, Alain Ize

Contributor
Abstract
This paper presents a portfolio model of financial intermediation in which currency choice is determined by hedging decisions on both sides of a bank’s balance sheet. Minimum variance portfolio (MVP) allocations are found to provide a natural benchmark to estimate the scope for dollarization of bank deposits and loans as a function of macroeconomic uncertainty. Dollarization hysteresis is shown to occur when the expected volatility of the inflation rate is high in relation to that of the real exchange rate. The evidence shows that MVP dollarization generally approximates actual dollarization closely for a broad sample of countries, and policy implications are explored
Language
eng
Literary Form
non fiction
Note
Bibliographic Level Mode of Issuance: Monograph
Physical Description
1 online resource (48 pages)
Form Of Item
online
Isbn
9786613786777

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