Taming Financial Dollarization: Determinants and Effective Policies

Taming Financial Dollarization: Determinants and Effective Policies – The Case of Uruguay

November 24, 2023

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Format: Chicago

Mauricio Vargas, and Jesus Sanchez. Taming Financial Dollarization: Determinants and Effective Policies – The Case of Uruguay, (USA: International Monetary Fund, 2023) accessed December 22, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

With some of the most significant levels of financial dollarization in the Western Hemisphere, Uruguay is characterized by extensive dollarization in both deposits and loans. While traditional factors like high inflation and substantial devaluations have been associated with such outcome, the enduring nature of dollarization in Uruguay also underscores the importance of structural elements. In formulating a holistic strategy to reduce dollarization, not only should there be an enhancement of the monetary policy framework aimed at maintaining low, stable inflation, but it should also consider the calibration of prudential policies such as currency-differentiated reserve requirements and foreign-currency credit repos.

Subject: Currencies, Dollarization, Exchange rates, Foreign exchange, Inflation, Monetary policy, Money, Prices, Reserve requirements

Keywords: Caribbean, Credit repo, Currencies, Deposit dollarization, Dollarization, Dollarization level, Dollarization trend, Exchange rates, Financial dollarization, Global, Inflation, Monetary Policy, Peru., Prudential Policies, Reserve requirements, South America, Uruguay, Western Hemisphere

Publication Details

Pages:

36
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2023/244
Stock No:

WPIEA2023244
ISBN:

9798400258428
ISSN:

1018-5941

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