This paper develops a two-country monetary model calibrated to data from the U.S. and Mexico to address the question of whether dollarization is welfare improving for the two countries. Our findings suggest that dollarization is not necessarily Pareto superior to monetary independence for Mexico. Thomas F. Cooley Vincenzo Quadrini Paganelli-Bull Professor of Economics Assistant Professor of Eco...

This paper aims to investigate the impact of exchange rate pass-through in dollarized economies to domestic inflation and economic growth: evidence from Southeast Asian countries. The panel data for five selected countries (Cambodia, Indonesia, Lao PDR, the Philippines and Vietnam) over the period 2000-2015 is employed. The empirical results by using fixed effects estimation found that there is...

Why do firms and banks hold foreign currency denominated liabilities? In this paper, we argue that foreign currency debt, by altering the effect of a devaluation on output, has a disciplining effect when the Central Bank’s objectives differ from the social optimum. However, under imperfect information, bad priors about the Central Bank induce excess dollarization of liabilities, which in turn l...

The recent debate over dollarization has been more focused on the motives of the idea than in analyzing the proposal more formally. Here we attempt to prove a very simple point that should be considered as the hardest lesson ever learnt by emergent economies: no stability is achieved without fiscal sustainability. The purpose of devaluation has been usually to find a way to finance a deficit. O...

During its transition towards a market economy, Vietnam embarked upon a path of disinflation through dollarization. In this paper, we develop a model to shed light on the determinants of inflation under dollarization and estimate it for Vietnam in the 1990s using a two-step procedure. During this period, inflation was induced by exchange rate variations and by an excess of broad money. The pape...

This study investigates the determinants of deposit dollarization within 81 cities Turkey for period 2007:Q4 – 2019:Q1. Within this scope, exchange rate, CDS premiums, city inflation, export and import are used to model dollarization. As an econometric approach both fixed random effect panel data methods implemented using relevant libraries in Python programming language measure impact independ...

This paper presents a simple modification to the standard IS curve used, at least implicitly, by policymakers that allows capital flight to have a contractionary effect in emerging market economies. In the standard model, capital flight leads to an expansionary shift in the IS curve through an increase in net exports. However, in the presence of liability dollarization for domestic firms, a cur...

Dollarization has significant effects on the real sector, monetary policy, and financial system. In this study, of dollarization banks’ performance in Turkey for period 2012-2017 are investigated by using both static dynamic panel data analyses. Our Generalized Method Moments (GMM) results indicate statistical significance negative impact deposit return assets (ROA). Both random regression GMM ...