Dollarization

Despite signs over the decades that the world role of the dollar has been problematic, and much recent commentary pointing to signs that de-dollarization is happening, questioning of the role of the dollar in the international monetary system has been remarkably untheoretical and unhistorical fashion. Since no heap of facts, no matter how large, can amount to an argument, this is a serious intellectual liability. Moreover, the world has been paying, at least the 1980s, a heavy price for this lack of understanding. The purpose of this paper is to clear up this misunderstanding by pointing to the largely ignored intimate and necessary relationship between financialization-of the Western economies and the pressures they generate for the rest of the world to follow suit, exposing them to dangerous financial and currency volatility-and the dollar-centred international monetary system. This relationship can only be understood by putting the dollar's world role in the longer historical perspective of the modern international monetary system, going back to the role of the pound sterling under to so-called international gold standard.

Makalah ini mencoba menjelaskan proses pengambilan kebijakan dolarisasi di Ekuador dimulai dari krisis yang terjadi pada akhir tahun 1990-an hingga akhirnya memberikan efek pada stabilitas moneter domestik Ekuador. Adanya “kerelaan” pemerintah nasional Ekuador untuk “tunduk” dan menggunakan dollar sebagai mata uang nasional tentunya membawa perubahan besar baik secara sosial dan ekonomi nasional Ekuador. Hal ini juga melihat besarnya harapan Mahuad sebagai decision-maker dari kebijakan ini terhadap dolarisasi sebagai solusi dari krisis yang terjadi di Ekuador. Hal yang kemudian berusaha tim penulis angkat menjadi fokus dalam tulisan makalah ini. Makalah ini juga kemudian berusaha memaparkan faktor-faktor yang mendukung pengambilan kebijakan dolarisasi ini baik yang berasal dari dalam maupun lingkup internasional. Fokus dari tulisan ini adalah untuk menunjukan peran dolarisasi sebagai salah satu bentuk rezim internasional dalam menghadapi krisis ekonomi domestik.

Cari işlemler açığı veren ülkelerde, yüksek reel faiz politikası uygulayarak dış finansmanın uluslararası likiditeyi ülkeye çekerek sağlanması istediği firmaların yurtdışından daha düşük maliyetli borçlanmasını artırmaktadır. Ayrıca, küresel kriz dönemlerinde uluslararası konvertibilitesi yüksek olan güçlü ülke paralarının ekonomik işlemlerde kullanılma oranı da yükselmektedir. Borç dolarizasyonuna neden olan bu ve benzeri süreçlerin, özellikle yerel kuru istikrarsız olan gelişmekte olan ülkelerde kırılganlıklar yaratmaktadır. Borç dolarizasyonu yüksek olan firmalarda, oluşan bu kırılganlıklar firma finansal yeterliliği ve geleceği açısından belirsizlikler oluşturmaktadır.
Bu çalışmada, 1996-2014 arasında Türkiye’deki reel sektörün borç dolarizasyonunun bilanço değeri üzerinden yatırımlara olan etkisi incelenmektedir. Özellikle gelişmekte olan ülke ekonomilerinde reel sektörün yabancı para cinsinden borçlanması bilanço değerleri üzerinde risk yaratmaktadır. Yerli para biriminin değer kaybettiği durumlarda şirketler finansman gideri kalemi içerisinde kur zararı yazabilmekte; dolayısıyle şirket ilgili bilanço döneminde gelirlerini arttırmış olsa bile karı azalabilmektedir. Böylece bilanço değeri düşmektedir. Ayrıca yerel para biriminin değer kaybettiği durumlarda Merkez Bankasının yerel para biriminin değerini koruma amacıyla faizleri arttırması bankaların kredi faizlerine de yansıyabileceği için şirketler daha yüksek faizle borçlanmaktadır; dolayısıyla finansal borçlar üzerinde de faiz riski oluşmaktadır. Söz konusu, firma eğer döviz kurundaki artışı avantaja çeviremiyorsa; örneğin ihracatçı değilse bilanço değerindeki düşüşten dolayı yatırımları açısından olumsuz etkilenir, şirkerin karlılığı azaldığı için yatırım harcamalarını arttırması da zorlaşır. Ekonometrik analiz kısmında, borç dolarizasyonunun belirleyicilerinin ve firma bilançoları üzerindeki etkilerini değerlendirmek amacıyla, yatay kesit bağımlılığı testleri, 1. ve 2. nesil birim kök testleri, yapısal kırılmaları dikkate alan eşbütünleşme testi ve uzun dönem katsayı testi uygulanmaktadır. Bu çalışmada, firmaya özgü değişkenler olarak kaldıraç oranı, ihracat gelirlerinin toplam satışlar içindeki oranı, net kar marjı, likidite oranları, stokların toplam varlıklar içindeki oranı ele alınmıştır. Makroekonomik değişkenler olarak ise gayri safi milli hasıla büyümesi, enflasyon, cari açık ve küresel risk iştahı kullanılmıştır.

Wie kommt ein Land dazu, freiwillig seine Währung zu Gunsten eines fremden Geldes aufzugeben und damit auf jegliche eigenständige Geld- und Währungspolitik zu verzichten? Welche Konsequenzen hat eine solche offizielle Dollarisierung? Diesen Fragen geht die vorliegende Arbeit auf den Grund. Sie stellt die Strategie der Dollarisierung in den Kontext der internationalen Geld- und Währungsbeziehungen. Sie analysiert und diskutiert die zentralen Argumentationsstränge der Dollarisierungsdebatte. Und sie verfolgt am Beispiel der Dollarisierung Ekuadors, wie die konkreten gesellschaftlichen und politischen Prozesse in einem von einer schweren Wirtschaftskrise geschuettelten Land zur Aufgabe der nationalen Währung führen.

Schließlich wird ein von Anthony Giddens' Theorie der Strukturierung angeleiteter Erklärungsansatz für das Phänomen Dollarisierung angeboten, der die Übernahme einer Fremdwährung als periphere Umgangsform mit den ambivalenten "Anforderungen" der aktuellen Konstellation neoliberaler Globalisierung versteht: Im "confidence game" (Paul Krugman) der internationalen Finanzmärkte, in dem sich die strukturelle Unsicherheit demokratischer Prozesse zunehmend als Manko an Glaubwürdigkeit darstellt, bietet sich die Übernahme einer harten Währung geradezu an. Gleichwohl ist die Dollarisierung alles andere als eine konsistente Antwort auf die Finankrisen der 90er Jahre. Während sie zwar die Gefahr von Währungsspekulation und -krise überwindet, beseitigt sie keineswegs deren Ursachen. Im Gegenteil: Kehrseite der monetären Stabilisierung ist insbesondere eine dauerhafte und anwachsende Konstellation der Überbewertung. Der Zielkonflikt zwischen einer überbewerteten Währung zur Attraktion externer Finanzmittel und einer unterbewerteten Währung zur Steigerung der internationalen Wettbewerbsfähigkeit des Produktionsstandorts, vor dem die Länder der Peripherie in Zeiten neoliberaler Globalisierung verschärft stehen, wird einseitig und absolut zu Lasten der industriellen Konkurrenzfähigkeit entschieden. Die Aussicht auf breite wirtschaftliche Entwicklung rückt so in weite Ferne.

Die Arbeit basiert auf einem eklektischen politökonomischen Ansatz, der monetär-keynesianische Analysen, Einsichten der neogramscianischen Internationalen Politischen Ökonomie, der Regulationstheorie und der Theorien Internationaler Beziehungen (Regimetheorie, Sozialkonstruktivismus, Globalisierungsanalysen) zu verbinden sucht.

Arguments on dollarization and its effect on the economy have been published mainly on economics and financial journals, yet, little is known about Somalia's unofficial dollarization. To contribute in that matter, this paper presents the effect of dollarization on Somali economy. The study is carried out using literature analysis. The study found out that dollarizing Somali economy brings severe economic turmoil including an absolute failure to achieve price stability in the local market. In addition, adopting this policy impedes achieving strong financial management system in the country. The study recommends that policymakers and business community should try to lessen the reliance on US dollar and encourage the use of a basket of currencies (in the short-run) while strengthening the use of local currency (in the long-run). Adopting such strategy will facilitate to avoid recurrent financial crisis which might happen if the use of US dollar as an internal currency is collapsed.

This paper investigates the impact of dollarization policy on Zimbabwe exports over a period of 20 years. The study used panel data for 50 Zimbabwe potential historical trading partners. Random effects model (REM) was applied to estimate the gravity model equation. Panel feasible generalized least squares (FGLS) regression technique corrected for heteroskedasticity and contemporaneous correlation across panels was applied to probe factors that drive Zimbabwe export flows. The results provide insights on the impact of dollarization policy, GDP, bilateral exchange rate, SADC membership status and population on Zimbabwe exports. If monetary authorities involuntarily re-dollarize the economy owing to monetary autonomy erosion, emphasis should be directed towards internal devaluation which could be attained by measures intended to exert downward pressure on domestic costs, wages and prices to recuperate export competitiveness. Further, government has to create an environment that encoura...

In Turkey in the pre-1980 period, since the use of foreign currency of individuals was confined, dollarization was not a significant problem. After the decisions of January 24, 1980, regulation in the exchange regime paved the way for foreign currency to be demanded for various aims. Inflation decreases both purchasing power of economic agents and amount of cash assets held in national currency. In inflationary periods, individuals want to refrain from worthless national currency by investing their assets in investment instruments such as real estate, gold and exchange. Turkey, where high inflation has been observed for many years, is among the countries that have experiencing these processes of dollarization. In this study which investigated the relationship between dollarization and inflation in Turkey, Vector Autoregressive Model (VAR) was used as econometric method. As a result of the variance decomposition results, 0.63% of a 1% change in the inflation rate in the 10th period is explained by the dollarization rate; In the same period, 5.32% of the 1% change in dollarization rate is explained by inflation rate. The relationship between the variables was investigated by Johansen Cointegration Test and no long-term relationship was found between the two variables. According to the Granger Causality findings, dollarization rate is cause of inflation rate at significance level of 10%.

A considerable amount of research has been carried-out over the past decade regarding the effects of dollarization on an economy. While only time will tell if dollarization continues to sustain positive longterm impacts, the short-term has provided considerable evidence of a very successful monetary integration. This research paper has analyzed the sustained effects of dollarization on the Ecuadorian economy which began in the year 2000. As an additional variable, tourism and tourism rates were analyzed due to their reach into each of these sectors of the Ecuadorian economic system and as the fastest growing industry in Ecuador. The Central Bank of Ecuador and related data sets reveal that dollarization has not only had a profoundly positive effect on Ecuadorian economics, but has decreased the poverty rates across the board for almost every province within the country. Finally, this research also analyzes tourism rates measurable by visitors arriving over time based on a retroactive vacation package price in an attempt to determine whether dollarization and/or inflation played a role in the tourism industry. A correlational regression determined that neither dollarization nor inflation play a significant role in the Ecuadorian tourism industry. Because tourism is a growing industry in Ecuador, this determination could have policy implications regarding local legislation, the career choice of tourism among students, and fiscal projection which ultimately will enhance the overall economic condition. Based on the analysis of the variables presented in this research, thirteen years of dollarization has led to a stabilized economy, lower rates of inflation, and positive effects of GPD (trade) in this robust agriculture producing South American country.

Financial dollarization in Sub-Saharan Africa is the most persistent compared to other regions of the world. This study complements the existing scant literature on dollarization in Africa by assessing the role of information sharing offices (public credit registries and private credit bureaus) on financial dollarization in 26 countries of SSA for the period 2001-2012. The empirical evidence is based on Ordinary Least Squares (OLS) and Generalised Method of Moments (GMM). The findings show that information sharing offices (which are designed to reduce information asymmetry) in the banking industry are a deterrent to dollarization. Policy implications are discussed.

En este trabajo se investiga mediante una revisión de la literatura, la relación existente entre el crecimiento económico y la dolarización. Primero se examinan publicaciones teóricas y se encuentra que existe una falta de consenso entre los autores en relación al impacto que la dolarización tiene sobre el crecimiento. Posteriormente, se muestran estudios empíricos en los que se encuentra una relación negativa entre estas dos variables. Luego, se analiza el ejemplo de Panamá, el cual muestra que la dolarización y el crecimiento alto y sostenido no son mutuamente excluyentes. Finalmente, se presenta el marco teórico seleccionado para abordar este problema y se propone un diseño de investigación.

This study argues that the ease at which economic agents have access to foreign earnings would influence/increase the level of dollarization in the economy. The three sources of foreign currency earnings are financial integration, trade openness and natural resource rent. As such, we extend the determinants of dollarization to capture these variables. A dataset of 26 countries in sub-Saharan Africa (SSA) for the period 2001 – 2012 was built. Based on Tobit regression, we found that all the proxies of foreign currency earning, with the exception of natural resource rent, are significant contributors to the increasing rate of dollarization. Specifically, it was found that trade openness and financial liberalization are positive determinants of dollarization, while natural resource rent serves as drag to the dollarization process. These results remain valid to three robustness tests. Policy implications and suggestions for future research were proposed.

This study contributes to the dollarization literature by expanding its determinants to account for different dimensions of globalization, using the widely employed KOF index of globalization. Specifically, globalization is “unbundled” into three different layers namely: economic, social and political dimensions. The study focuses on 25 sub-Saharan African (SSA) countries for the period 2001-2012.Using the Tobit regression approach, the following findings are established. First, from both economic and statistical relevance, the social and political dimensions of globalization constitute the key dollarization amplifiers, while the explanatory power of the economic component is weaker on dollarization. Second, consistent with the theoretical underpinnings, macroeconomic instabilities (such as inflation and exchange rate volatilities) have the positive expected signs. Third, the positive association between the accumulation of international reserves and dollarization is also apparent. Policy implications are discussed.

The study has investigated the main determinants of dollarization on the assets side and the liability side and financial dollarization using different measures. Following (Mogardini and Mueller, 1999), the econometric results indicated that interest rate differentials have little effect on currency substitution and deposit dollarization measures. Also, they implied that the real effective exchange rate (REER) movements do not contribute in the portfolio choice determination for depositors. However, the effect of international reserves was found to be significant and adversely related with dollarization. As for asset, the results illustrated that the effects of monetary policy decisions on extended foreign currency credit are significant only in the short run. The REER movements have a positive effect in the short run. The effect of reserves on asset dollarization was significant and positive only in the short run. As for financial dollarization, interest rate differentials had no significant impact indicating that portfolio allocation choices are determined by the volatility of inflation and the REER movements, which could be verified by the positive effect of the REER, whereas reserves had a significant negative impact on financial dollarization in the short and long run. The ratchet effect coefficient has a positive sign in all four models and its coefficients were significant in the short run and long run indicating the persistence of dollarization phenomenon in Jordan.

This paper investigates the impact of dollarization policy on Zimbabwe exports over a period of 20 years. The study used panel data for 50 Zimbabwe potential historical trading partners. Random effects model (REM) was applied to estimate the gravity model equation. Panel feasible generalized least squares (FGLS) regression technique corrected for heteroskedasticity and contemporaneous correlation across panels was applied to probe factors that drive Zimbabwe export flows. The results provide insights on the impact of dollarization policy, GDP, bilateral exchange rate, SADC membership status and population on Zimbabwe exports. If monetary authorities involuntarily re-dollarize the economy owing to monetary autonomy erosion, emphasis should be directed towards internal devaluation which could be attained by measures intended to exert downward pressure on domestic costs, wages and prices to recuperate export competitiveness. Further, government has to create an environment that encoura...

In its essence and content, dollarization is one of the keys and most significant phenomena of modern dynamically developing international monetary and financial relations. There are different theoretical approaches to determining the economic essence and content of the complex and contradictory phenomenon of dollarization. Different scientists have investigated the monetary nature of this phenomenon and have given a comparison of the concepts of official and partial dollarization, based on the degree of economic coverage of dollarization. In this research the process of official dollarization is considered on the example of Eurasian Economic Union (EAEU) member states. The paper examines the scale of financial dollarization in the EAEU member states, where, due to the loss of residents' confidence in the monetary policy and the national monetary unit, the functions of the national currency are partially replaced by the US dollar. Furthermore, the role of the US Federal Reserve in the implementation of dollarization of the foreign economies is analyzed. The article substantiates the intention of the US Federal Reserve to take steps to dollarize the foreign countries’ economy in the context of the started process of de-dollarization of the world economy. The most active supporters of de-dollarization are Russia, China, and Iran. Their efforts are aimed at weakening the dominant position of the dollar as a key reserve currency, the currency of international settlements. In the current condition of the world economic development, it is unlikely to expect a weakening of the position of the US dollar, given the role of the US dollar in the trade of oil and petroleum products. The petrodollar system is the basis of the US dominance in the global financial system and the key to the stability of the US dollar. As a result, countries are forced to buy dollars in order to be able to purchase oil on the open market. While the demand for the US dollar will remain at a high level, it is not necessary to talk about the success of de-dollarization and the transition from an American-centered monetary and financial system to a polycentric one in the near future.

In this study, the effects of the volatility shocks in the exchange rate on the resident dollarization and the net capital flows are discussed. The volatility of the exchange rate is derived using EGARCH model. ARDL method is used to model the effects of foreign exchange rate volatility on capital flows and dollarization in the long and short term. Additionally, the interest rate series of the relevant foreign currencies have been added to the model to represent the influence of the changes in the interest rate policies in this context. Findings indicate that, in terms of influencing capital flows and resident dollarization, interest rate policies have a significant effect in the short-run while having an even stronger effect in the long run. Additionally, exchange rate shocks have been found to have a limited effect on capital outflows and resident dollarization. Results suggest that the decision making process of investors and residents is not impulsive and even during the periods of excessive exchange rate volatility, the capital outflows and the resident dollarization are significantly more affected by interest rate changes than exchange rate shocks.

This paper investigates the impact of dollarization policy on Zimbabwe exports over a period of 20 years. The study used panel data for 50 Zimbabwe potential historical trading partners. Random Effects Model (REM) was applied to estimate the gravity model equation. Panel Feasible Generalized Least Squares (FGLS) regression technique corrected for heteroskedasticity and contemporaneous correlation across panels was applied to probe factors that drive Zimbabwe export flows. The results provide insights on the impact of dollarization policy, GDP, bilateral exchange rate, SADC membership status and population on Zimbabwe exports. If monetary authorities involuntarily re-dollarize the economy owing to monetary autonomy erosion, emphasis should be directed towards internal devaluation which could be attained by measures intended to exert downward pressure on domestic costs, wages and prices to recuperate export competitiveness. Further, government has to create an environment that encoura...

Entretien accordé à la revue Causeur le 07.01.2021. Considéré par certains comme le dernier héritage de la colonisation, le Franc CFA (FCFA) est encore l'objet de tous les fantasmes. Il y a un an, les présidents français et ivoirien ont annoncé que cette monnaie commune à quinze pays africains serait remplacée dans la moitié ouest-africaine d'entre eux, par « l'Eco », une nouvelle devise dont la création se fait toujours attendre. Dans un ouvrage récent, La fin du franc CFA (oct. 2020, VA Éditions, Versailles), le géopolitologue Loup Viallet dévoile les enjeux vertigineux de la coopération monétaire franco-africaine pour l'Europe et pour l'Afrique. Pour le magazine Causeur, il a accepté de répondre à nos questions sur ce sujet qui cristallise beaucoup de passions et alimente de nouvelles idées.

This paper investigates the impact of dollarization policy on Zimbabwe exports over a period of 20 years. The study used panel data for 50 Zimbabwe potential historical trading partners. Random Effects Model (REM) was applied to estimate the gravity model equation. Panel Feasible Generalized Least Squares (FGLS) regression technique corrected for heteroskedasticity and contemporaneous correlation across panels was applied to probe factors that drive Zimbabwe export flows. The results provide insights on the impact of dollarization policy, GDP, bilateral exchange rate, SADC membership status and population on Zimbabwe exports. If monetary authorities involuntarily re-dollarize the economy owing to monetary autonomy erosion, emphasis should be directed towards internal devaluation which could be attained by measures intended to exert downward pressure on domestic costs, wages and prices to recuperate export competitiveness. Further, government has to create an environment that encoura...

Through policy decision of governments and through other unofficial means, many countries have moved away from their local currency to seek protection against inflation provided by a hard currency, the dollar. Among the promises of dollarization is the reduction of sovereign risk associated with developing country debts and subsequently an increase in the rate of economic growth as the cost of financing economic growth declines. This however may not occur as the loss of the policy tool could lead to inflexibility as the economy is not able to respond to shocks, resulting in an increase in sovereign risk. This paper explores the effect of dollarization on sovereign risk in Ecuador and concludes that dollarization does not decrease sovereign risk.This paper was presented at the 18th International Conference of the International Trade and Finance Association, meeting at Universidade Nova de Lisboa, May 22, 2008, in Lisbon, Portugal.JEL Classification Codes: E44; F31; G19; O54 Keywords:...

En este segundo Tomo de la colección se estudia el caso de los países dolarizados, con especial énfasis en Ecuador, hoy por hoy el país dolarizado más grande del mundo tanto en territorio, población y así como también en el tamaño de su economía. El libro contiene 4 secciones, las cuales dejan lecciones sobre el manejo del Comercio Exterior y los esfuerzos por alcanzar la Convergencia Económica en un país dolarizado.

En la primera sección se presenta la historia y la importancia del Comercio Exterior para el desarrollo de un país en general, y de Ecuador en particular, de donde se desprenden dos grandes lecciones: primera, los modelos de crecimiento económico basados en comercio exterior, donde destaca el modelo CBE aplicado por los famosos Tigres Asiáticos, implican que el país para crecer debe volverse parte de las cadenas de valor global. La segunda lección es que el mayor crecimiento del comercio exterior podría no estar con el país “ancla”, Estados Unidos para la región donde se ubica Ecuador.

La segunda sección del libro utiliza la Economía Comparativa para contrastar el sistema de la Dolarización con otro previo y muy popular: el patrón oro. De está sección se desprende que la Dolarización es un sistema Neo-Mercantilista, enfocado a obtener circulante de dinero-especia, pero que no actúa discriminando las importaciones, no tiene un sesgo anti-exportador, ni tampoco lo acompaña un aparataje militarista como en el patrón oro.

La tercera sección analiza el comportamiento del comercio exterior ecuatoriano, para corroborar que la Dolarización, además de ser una reforma monetaria, también es una reforma liberalizadora del comercio exterior. Se comparan los resultados de Ecuador contra las teorías de Smith, Ricardo, y Heckscher-Ohlin, encontrando resultados sorprendentes en cuanto a que sucede cuando se liberaliza el comercio en lo relativo al crecimiento del comercio, la especialización y el origen de esa posible especialización.

Finalmente, la cuarta sección se enfoca en el sector laboral y la economía del conocimiento y como la Dolarización afecta a ambos restringiendo al país en sus posibilidades de desarrollo económico y mejores niveles de vida.

Como un caso de estudio, se presenta un capítulo sobre la conveniencia o no de firmar un Tratado de libre comercio entre Ecuador y Estados Unidos, su país ancla.

Exchange rate affects the manufacturing sector through investment and balance sheet channels. The second channel seems to be dominant for Turkey where an increase in exchange rate increases the costs of firms and may diminish their profits. A possible common explanation for this phenomenon is the high degree of liability dollarization, supply side. That is apparent from the real sector balance sheet items especially when the capital inflows are reversed and domestic currency depreciates. On the other hand, it is not a homogenous effect for importing and exporting sectors. It depends on the production and financial dependency structure of each sector. Taking into account the importance of negativities in micro basis may convert to a macro scale negativity in the long-run. This study provides sectoral liability dollarization ratios during the years 2009-2012 for the Turkish economy. The ratios are calculated for total companies, total manufacturing and 22 sub-sectors in manufacturing and they are compared according to their total, short-run and long-run liability structures. The scales of the companies are taken into account and possible diversifications among the sectors in manufacturing are discussed. Possible effects of the domestic currency depreciation on the liability dollarization of the sectors are evaluated.

The study empirically evaluated the Reserve Bank of Zimbabwe (RBZ) foreign exchange interventions in for the period pre and post dollarization. There have been different forms and motives of intervention used by the RBZ in line with the exchange rate system and fundamental macroeconomic problems at each given point in time. There has been sterilised and unsterilized intervention together with direct and indirect interventions. Success ranges from the fixed exchange rate system when the main reason for intervention was to defend the fixed parity hence success was mainly imminent for the period 1985 to 1995 when the foreign exchange reserves were more than enough but the reserves started to be depleted towards 2000 and hence led to the move towards the flexible exchange rate system from the Auction system of 2003 to the actual flexible exchange rate system leading to the abandonment of the local currency as it continued to lose value relative to foreign currencies. Intervention became indirect and fairly successful from 2008 after the adoption of the multicurrency system. Reasons behind unsuccessful intervention being depletion of foreign currency reserves due to persistent Balance of Payments deficits, declining levels of productivity, vulnerability to natural disasters such as droughts, rampant corruption, policy inconsistency and incredibility. However if the above fundamental issues are not addressed, there is no need for the country to return its own currency since it will never stand against other foreign currencies hence recommend the need to continue with the multicurrency exchange rate regime.

The decision of the Argentine non-financial private sector to save in dollars, usually outside the financial system, has long been debated among Argentine economists. At the same time, the Peruvian private sector has de-dollarized its portfolio. Based on optimal portfolio selection theory both decisions are explained. It is suggested that the degree of dollarization in both the Argentine and Peruvian private sector portfolio may have been influenced by monetary policy; and that the instauration of inflation targeting and floating exchange rate regimes can strengthen the demand for assets denominated in Argentine pesos and induce dedollarization.

This paper investigates the impact of dollarization policy on Zimbabwe exports over a period of 20 years. The study used panel data for 50 Zimbabwe potential historical trading partners. Random effects model (REM) was applied to estimate the gravity model equation. Panel feasible generalized least squares (FGLS) regression technique corrected for heteroskedasticity and contemporaneous correlation across panels was applied to probe factors that drive Zimbabwe export flows. The results provide insights on the impact of dollarization policy, GDP, bilateral exchange rate, SADC membership status and population on Zimbabwe exports. If monetary authorities involuntarily re-dollarize the economy owing to monetary autonomy erosion, emphasis should be directed towards internal devaluation which could be attained by measures intended to exert downward pressure on domestic costs, wages and prices to recuperate export competitiveness. Further, government has to create an environment that encoura...

The aim of the study is to examine the determinants of dollarization in Turkey. For this purpose, the 2013M1-2021M2 period was analyzed with monthly data using regression and causality tests. As a result of the regression analysis, a positive relationship was found between
international reserves and returns of financial investment instruments and dollarization. On the other hand, a negative relationship was found between domestic and foreign interest rates difference and exchange rate and dollarization. As a result of the Granger causality test, a one-sided causality was found from international reserves and returns of financial investment instruments to dollarization. In addition, a one-sided causality relationship has been found from dollarization to exchange rate. Policy implications have been made in the context of the results of the study and some suggestions have been made for future studies.

This paper investigates the impact of dollarization policy on Zimbabwe exports over a period of 20 years. The study used panel data for 50 Zimbabwe potential historical trading partners. Random effects model (REM) was applied to estimate the gravity model equation. Panel feasible generalized least squares (FGLS) regression technique corrected for heteroskedasticity and contemporaneous correlation across panels was applied to probe factors that drive Zimbabwe export flows. The results provide insights on the impact of dollarization policy, GDP, bilateral exchange rate, SADC membership status and population on Zimbabwe exports. If monetary authorities involuntarily re-dollarize the economy owing to monetary autonomy erosion, emphasis should be directed towards internal devaluation which could be attained by measures intended to exert downward pressure on domestic costs, wages and prices to recuperate export competitiveness. Further, government has to create an environment that encourage foreign direct investment inflows to ease liquidity challenges probable to be experienced under dollarization regime. Nevertheless, macroeconomic fundamentals ought to be addressed with action to spur economic growth. Sufficient resources should be channelled towards increasing the country's productive capacity, and this can enhance country's ability to supply export products to the international market, and curb import growth.

This study contributes to the dollarization literature by expanding its determinants to account for different dimensions of globalization, using the widely employed KOF index of globalization. Specifically, globalization is “unbundled” into three different layers namely: economic, social and political dimensions. The study focuses on 25 sub-Saharan African (SSA) countries for the period 2001-2012.Using the Tobit regression approach, the following findings are established. First, from both economic and statistical relevance, the social and political dimensions of globalization constitute the key dollarization amplifiers, while the explanatory power of the economic component is weaker on dollarization. Second, consistent with the theoretical underpinnings, macroeconomic instabilities (such as inflation and exchange rate volatilities) have the positive expected signs. Third, the positive association between the accumulation of international reserves and dollarization is also apparent. ...

The study empirically evaluated the Reserve Bank of Zimbabwe (RBZ) foreign exchange interventions in for the period pre and post dollarization. There have been different forms and motives of intervention used by the RBZ in line with the exchange rate system and fundamental macroeconomic problems at each given point in time. There has been sterilised and unsterilized intervention together with direct and indirect interventions. Success ranges from the fixed exchange rate system when the main reason for intervention was to defend the fixed parity hence success was mainly imminent for the period 1985 to 1995 when the foreign exchange reserves were more than enough but the reserves started to be depleted towards 2000 and hence led to the move towards the flexible exchange rate system from the Auction system of 2003 to the actual flexible exchange rate system leading to the abandonment of the local currency as it continued to lose value relative to foreign currencies. Intervention became...

This study gives a non-traditional framework for the evaluation of the convenience of an asymmetric monetary association (such as dollarization), from the point of view of the country that gives up its monetary sovereignty. In the analytical part it is discussed the relationship between dollarization and real volatility in a new model where traditional OCA criterium supporting a positive GDP correlation between partners is neither a necessary nor sufficient condition to reduce output fluctuations (even when prices are sticky and factor mobility is weak). Finally, we show that empirical evidence is very weak in order to support the case for ”official dollarization” in Argentina DOLLARISAT ION E T VOLAT ILITE REELLE Diego Bastourre, Jorge Carrera, Mariano Féliz et Demian Panigo

Through policy decision of governments and through other unofficial means, many countries have moved away from their local currency to seek protection against inflation provided by a hard currency, the dollar. Among the promises of dollarization is the reduction of sovereign risk associated with developing country debts and subsequently an increase in the rate of economic growth as the cost of financing economic growth declines. This however may not occur as the loss of the policy tool could lead to inflexibility as the economy is not able to respond to shocks, resulting in an increase in sovereign risk. This paper explores the effect of dollarization on sovereign risk in Ecuador and concludes that dollarization does not decrease sovereign risk.This paper was presented at the 18th International Conference of the International Trade and Finance Association, meeting at Universidade Nova de Lisboa, May 22, 2008, in Lisbon, Portugal.JEL Classification Codes: E44; F31; G19; O54 Keywords:...