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FINANCIAL DOLLARIZATION: Evaluating the consequences

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  • Eduardo Levy-Yeyati

Abstract

Financial dollarization has been placed at the forefront of the policy debate in many developing economies, for reasons that include its influence on inflation performance and, most prominently, the currency imbalance and associated financial fragility that it introduces for the economy as a whole. This paper contributes to this debate by revisiting the evidence on the impact of FD on inflation, financial fragility and economic performance in light of a new updated database. It finds evidence that financially dollarized economies tend to display higher inflation rates, higher propensity to suffer banking crises and slower and more volatile output growth, without significant gains in terms of domestic financial depth

Suggested Citation

  • Eduardo Levy-Yeyati, 2004. "FINANCIAL DOLLARIZATION: Evaluating the consequences," Econometric Society 2004 Latin American Meetings 184, Econometric Society.
    • Handle: RePEc:ecm:latm04:184
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    More about this item

    Keywords

    dollarization;

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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