Dollarization of Liabilities: Beyond the Usual Suspects
IMF Working Papers, January 1, 2003
Source details
- Canonical URL
- Dollarization of Liabilities: Beyond the Usual Suspects
Other formats
Bibliographic details
- Authors: Adolfo Barajas, Armando Méndez Morales
- Published: January 1, 2003
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451842807.001
Authors and Publication
- By Adolfo Barajas, Armando Méndez Morales
- January 1, 2003
- IMF Working Papers, Working Paper No. 2003/011
- Issue: 011
- Volume: 2003
- Pages: 41
- DOI: https://doi.org/10.5089/9781451842807.001
- Stock No: WPIEA0112003
- ISBN: 9781451842807
- ISSN: 1018-5941
Research question and scope
- Core question: Which factors explain dollarization of liabilities (DL) in emerging markets beyond the "usual suspects"?
- Sample and focus: Based on a sample of Latin American countries.
- Framing of "usual suspects": Long history of unsound macroeconomic policies; development and institutional factors; moral hazard opportunities related to government guarantees.
Main findings
- Dollarization of liabilities (DL) has emerged as a key factor in explaining the vulnerability of emerging markets to financial and currency crises.
- Empirical assessment finds that the following factors are at least as important as the "usual suspects" in explaining DL:
- Ongoing central bank intervention in the foreign exchange market.
- Relative market power of borrowers.
- Financial penetration.
Themes and keywords
- Subject areas: Bank deposits, Banking, Currencies, Deposit insurance, Dollarization, Exchange rates, Financial crises, Financial services, Foreign exchange, Monetary policy, Money
- Keywords included in the source: Bank deposits, bank profit maximization behavior, credit, Currencies, Deposit insurance, dollarization, effective spread, exchange rate, Exchange rates, foreign currency, foreign currency borrowing, foreign currency deposit, foreign currency loan, foreign currency mismatch, foreign exchange, foreign exchange intervention, foreign exchange position, Global, lending position, market power, maximization behavior, panel data, WP
Implications (as indicated by the paper)
- Policy and analysis should consider factors beyond historical macroeconomic and institutional weaknesses, specifically:
- The role of central bank foreign exchange intervention in sustaining or influencing DL.
- How relative market power of borrowers affects currency composition of liabilities.
- The effect of financial penetration on the prevalence of foreign currency liabilities.
IMF Working Paper: "Dollarization of Liabilities: Beyond the Usual Suspects" (Working Paper No. 2003/011), Adolfo Barajas and Armando Méndez Morales, January 1, 2003.
Content in this bundle
- Dollarization of Liabilities: Beyond the Usual Suspects - WP/03/11