IMF Working Papers

Financial De-Dollarization: Is it for Real?

By Eduardo Levy Yeyati, Alain Ize

September 1, 2005

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Eduardo Levy Yeyati, and Alain Ize. "Financial De-Dollarization: Is it for Real?", IMF Working Papers 2005, 187 (2005), accessed April 21, 2025, https://doi.org/10.5089/9781451862065.001

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

De facto (unofficial) dollarization, defined as the holding by residents of assets and liabilities denominated in a foreign currency, is a policy concern in an increasing number of developing economies. This paper addresses the dollarization debate from this perspective, with the goal of setting the stage for a more detailed and focused discussion of whether de-dollarization should be a policy objective and, if so, how best to pursue this objective. We review existing theories of de facto dollarization and the extent to which they are supported by the available evidence, presents the main strategies for reform, and proposes a list of policy recommendations.

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

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