What Is Driving Financial de-Dollarization in Latin America? Sebastian Sosa

ISBN: 9781283569194

Published: January 1st 2011

ebook

25 pages


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What Is Driving Financial de-Dollarization in Latin America?  by  Sebastian Sosa

What Is Driving Financial de-Dollarization in Latin America? by Sebastian Sosa
January 1st 2011 | ebook | PDF, EPUB, FB2, DjVu, audiobook, mp3, RTF | 25 pages | ISBN: 9781283569194 | 4.56 Mb

In the last decade, a group of Latin American countries (Bolivia, Paraguay, Peru, and Uruguay) experienced a gradual, yet sustained decline in financial dollarization. This paper documents the stylized facts and uses a standard VAR approach toMoreIn the last decade, a group of Latin American countries (Bolivia, Paraguay, Peru, and Uruguay) experienced a gradual, yet sustained decline in financial dollarization.

This paper documents the stylized facts and uses a standard VAR approach to examine the drivers of both deposit and credit de-dollarization. It finds that the exchange rate appreciation has been a key factor explaining deposit de-dollarization. The introduction of prudential measures to create incentives to internalize the risks of dollarization (including an active management of reserve requirement differentials), the development of a capital market in local currency, and de-dollarization of deposits have all contributed to a decline in credit dollarization. Continuing efforts on these fronts, while maintaining macroeconomic stability and strong fundamentals, would help deepening de-dollarization.



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