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Financial dollarization and de-dollarization in the new milennium

Author

Listed:
  • Eduardo Levi Yeyati

    (Universidad Torcuato Di Tella/The Brookings Institution)

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 Levi Yeyati, 2021. "Financial dollarization and de-dollarization in the new milennium," Working Papers 38, Red Nacional de Investigadores en Economía (RedNIE).
    • Handle: RePEc:aoz:wpaper:38
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    Cited by:

    1. Madison, Florian, 2024. "A microfounded approach to currency substitution and government policy," Journal of Economic Theory, Elsevier, vol. 219(C).
    2. 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.
    3. Murat Aslan & Onder Ozgur, 2024. "Financial dollarization and its effects on inflation and output in Turkey: a machine learning approach," Quality & Quantity: International Journal of Methodology, Springer, vol. 58(6), pages 5777-5804, December.
    4. 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.
    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. repec:ocp:rtrade:pb_33-22 is not listed on IDEAS
    7. 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.
    8. repec:ocp:ppaper:pb33-22 is not listed on IDEAS
    9. repec:ocp:rpaeco:pb_33-22 is not listed on IDEAS

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