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To Dollarize or De-dollarize: Consequences for Monetary Policy

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  • Patricia Alvarez Plata
  • Alicia Garcia-Herrero

Abstract

The aim of this paper is to review the experience of various dual-currency economies and analyze the main challenges faced by policymakers in formulating and conducting monetary policy. To that end, it distinguishes between countries with growing dollarization and those which have managed to revert such trend. In addition to the Asian countries of interest we look at a number of Latin American countries, Israel and Russia. All of this countries have experienced – and in some cases still do – a high degree of dollarization. Though there are several other countries within Central and Eastern Europe where a hard currency, i.e. the euro, is frequently used for financing and saving purposes, an important difference of this region and the ASEAN countries in transition, is that the latter are nowhere close to adopting the dollar as an official currency or to enter a monetary union. Israel is chosen as a case study, because it is one of the few countries in the world that were highly dollarized, and could succesfully dedollarize. Also Russia, has been trying to de-dollarize in the last couple of years. However, as we will discuss below they did not manage to lower the deposit dollarization ratio on a sustained basis.

Suggested Citation

  • Patricia Alvarez Plata & Alicia Garcia-Herrero, 2008. "To Dollarize or De-dollarize: Consequences for Monetary Policy," Working Papers 0808, BBVA Bank, Economic Research Department.
  • Handle: RePEc:bbv:wpaper:0808
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    Cited by:

    1. John Lipsky, 2012. "Session III: Introductory remarks," BIS Papers chapters, in: Bank for International Settlements (ed.), Financial sector regulation for growth, equity and stability, volume 62, pages 123-124, Bank for International Settlements.
    2. Atchana Waiquamdee, 2011. "Progress towards internationalisation: the Korean and Singaporean experiences - comments on Kim and Suh's paper "Internationalisation of the won" and Luke Goh's paper "Singapore dollar'," BIS Papers chapters, in: Bank for International Settlements (ed.), Currency internationalisation: lessons from the global financial crisis and prospects for the future in Asia and the Pacific, volume 61, pages 172-179, Bank for International Settlements.
    3. Akhand Akhtar Hossain, 2009. "Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 12777.
    4. Bitar, Joseph, 2021. "The unique dollarization case of Lebanon," Economic Systems, Elsevier, vol. 45(2).

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