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Financial dollarization and de-dollarization in the new millennium

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  • Eduardo Levy Yeyati

Abstract

Dollarization, in its many variants, is crucial to understanding Latin American macroeconomics, as well as that of many developing countries. This paper builds a new updated dataset on dollarization, reviews its evolution in Latin America since 2000, and summarizes the lessons learned from several de-dollarizing attempts in the region, based on a three-way taxonomy: 1) attempts that focus on the macroeconomic drivers, 2) microeconomic measures that deter investors from dollarizing their financial assets and liabilities based on market incentives or regulatory limits, and 3) regulations that affect the choice of foreign currency as a means of payment or a unit of account. The study provides examples using seven cases that may be considered paradigmatic of the different dollarization varieties: Bolivia, Peru, Uruguay, Costa Rica, El Salvador, Ecuador and Venezuela.

Suggested Citation

  • Eduardo Levy Yeyati, 2021. "Financial dollarization and de-dollarization in the new millennium," Documentos de trabajo 19460, FLAR.
    • Handle: RePEc:col:000566:019460
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    Cited by:

    1. Eduardo Levy Yeyati & Federico Sturzenegger, 2023. "A balance‐sheet approach to fiscal sustainability," Fiscal Studies, John Wiley & Sons, vol. 44(1), pages 61-84, March.
    2. repec:ocp:ppaper:pb33-22 is not listed on IDEAS
    3. Otaviano Canuto & Sebastian Carranza, 2022. "Dollarization of Argentina: Revival of a Zombie Idea," Policy briefs on Trade Dynamics and Policies 2206, Policy Center for the New South.
    4. Otaviano Canuto & Sebastian Carranza, 2022. "Dollarization of Argentina: Revival of a Zombie Idea," Policy briefs on Economic Trends and Policies 2217, Policy Center for the New South.
    5. Chen, Hongyi & Siklos, Pierre L., 2023. "Currency substitution in a world of looming retail CBDCs: Suggestive currency substitution-based evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 88(C).
    6. Cyril Monnet & Hyun Song Shin & Jon Frost & Leonardo Gambacorta & Raphael Auer & Tara Rice, 2022. "Central Bank Digital Currencies: Motives, Economic Implications, and the Research Frontier," Annual Review of Economics, Annual Reviews, vol. 14(1), pages 697-721, August.
    7. Otaviano Canuto & Sebastian Carranza, 2022. "Dollarization of Argentina: Revival of a Zombie Idea," Research papers & Policy papers on Trade Dynamics and Policies 2206, Policy Center for the New South.
    8. Otaviano Canuto & Sebastian Carranza, 2022. "Dollarization of Argentina: Revival of a Zombie Idea," Research papers & Policy papers on Economic Trends and Policies 2217, Policy Center for the New South.

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