ENGLISH

Assessing Financial Vulnerability in Partial Dollarized Economies

By Eduardo Morón , Diego Winkelried , Juan Castro

Book information

Publisher
Universidad del Pacífico (UP) - CIUP
Year
2004
Language
english
Format
PDF
Filesize
2 MB (1844829 bytes)
Series
Documento de Discusión; DD/04/03
Pages
39\40
Topic
Economy
Time added
2022-05-23 02:54:33
fear of floatingfinancial vulnerabilityMonetary PolicyPeru; Liability dollarization

Description

The reduction of macroeconomic vulnerability in emerging markets is at the core of the research agenda. Liability dollarization plays a vital role and its implications have been addressed in the literature via a “financial accelerator” mechanism. If we asses vulnerability in terms of the evolution of investment, we claim that, in absence of an asset price channel, departures from a pure float will mitigate vulnerability and improve welfare. Conversely, with an active asset price channel a tighter exchange rate policy will have marginal effects on welfare and vulnerability when compared to that associated to a reduction in liability dollarization. Key words: Liability dollarization, financial vulnerability, fear of floating, monetary policy.

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