What is Driving Financial De-Dollarization in Latin America?

By Mercedes Garcia-Escribano, Sebastian Sosa

January 1, 2011

Preview Citation

Format: Chicago

Mercedes Garcia-Escribano, and Sebastian Sosa. What is Driving Financial De-Dollarization in Latin America?, (USA: International Monetary Fund, 2011) accessed December 22, 2024

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

In the last decade, a group of Latin American countries (Bolivia, Paraguay, Peru, and Uruguay) experienced a gradual, yet sustained decline in financial dollarization. This paper documents the stylized facts and uses a standard VAR approach to examine the drivers of both deposit and credit de-dollarization. It finds that the exchange rate appreciation has been a key factor explaining deposit de-dollarization. The introduction of prudential measures to create incentives to internalize the risks of dollarization (including an active management of reserve requirement differentials), the development of a capital market in local currency, and de-dollarization of deposits have all contributed to a decline in credit dollarization. Continuing efforts on these fronts, while maintaining macroeconomic stability and strong fundamentals, would help deepening de-dollarization.

Subject: Bank deposits, Credit, De-dollarization, Dollarization, Exchange rates, Financial services, Foreign exchange, Monetary policy, Money

Keywords: Bank deposits, Banking system, Bolivia, Credit, Credit dollarization, De-dollarization, Deposit, Deposit dollarization, Dollarization, Dollarization hysteresis, Dollarization level, Dollarization ratio, Exchange rate, Exchange rates, Foreign exchange, Paraguay, WP

Publication Details

Pages:

23
Volume:

---
DOI:

---
Issue:

---
Series:

Working Paper No. 2011/010
Stock No:

WPIEA2011010
ISBN:

9781455211883
ISSN:

1018-5941

FACTSHEETS

RESOURCES

TOPICS

Flagship Publications

Other Publications

IMF reports and publications by country

Regional Offices

All News

See Also

For Journalists

Press Center

RESOURCES

FLAGSHIPS

KEY SERIES

IMF NOTES

IMF Working Papers