Home » Dollarization of Liabilities: Beyond the Usual Suspects by Adolfo Barajas
Dollarization of Liabilities: Beyond the Usual Suspects Adolfo Barajas

Dollarization of Liabilities: Beyond the Usual Suspects

Adolfo Barajas

Published January 1st 2003
ISBN : 9786613784681
ebook
43 pages
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 About the Book 

Dollarization of liabilities (DL) has emerged as a key factor in explaining the vulnerability of emerging markets to financial and currency crises. Usual suspects of causing DL comprise fatalistic determinants such as a long history of unsoundMoreDollarization of liabilities (DL) has emerged as a key factor in explaining the vulnerability of emerging markets to financial and currency crises. Usual suspects of causing DL comprise fatalistic determinants such as a long history of unsound macroeconomic policies and development and institutional factors, aided by moral hazard opportunities related to government guarantees. This paper assesses empirically the relevance of these factors relative to alternative explanations. Based on a sample of Latin American countries, we find that ongoing central bank intervention in the foreign exchange market, relative market power of borrowers, and financial penetration are at least as important in explaining DL.