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Financial De-dollarization: Is It for Real?

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Financial Dollarization

Part of the book series: Procyclicality of Financial Systems in Asia ((IMF))

Abstract

Some important events and trends in recent years have intensified concerns about FD. First, there is mounting evidence that FD has increased or remained stable despite declining inflation rates. Second, dollarization has greatly complicated the policy response in several crises and near-crisis episodes and, in some cases, has been singled out as the source of financial vulnerability that triggered a crisis. Third, the widespread shift from fixed to more flexible exchange rate regimes has altered the policy landscape, highlighting the prudential consequences of exchange rate risk. As a result, the policy debate about de-dollarization has heated up. Is de-dollarization a realistic goal? Is it worth the trouble? If so, how can it be pursued? Guided by these questions, this chapter tries to summarize where we stand on what remains a continuing debate.

The authors would like to thank Adrían Armas, Roberto Chang and the participants at the April 2005 Lima conference for their comments.

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Authors
  1. Alain Ize
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  2. Eduardo Levy Yeyati
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Editor information

Editors and Affiliations

  1. Economic Studies Department, Central Reserve Bank of Peru, Peru

    Adrián Armas (Head) (Head)

  2. Monetary and Financial Systems Department, International Monetary Fund, USA

    Alain Ize (Area Chief) (Area Chief)

  3. Center for Financial Research at the Business School, Torcuato Di Tella University, Argentina

    Eduardo Levy Yeyati (Professor and Director, Research Associate) (Professor and Director, Research Associate)

  4. Research Department, Inter-American Development Bank, USA

    Eduardo Levy Yeyati (Professor and Director, Research Associate) (Professor and Director, Research Associate)

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© 2006 International Monetary Fund

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Ize, A., Yeyati, E.L. (2006). Financial De-dollarization: Is It for Real?. In: Armas, A., Ize, A., Yeyati, E.L. (eds) Financial Dollarization. Procyclicality of Financial Systems in Asia. Palgrave Macmillan, London. https://doi.org/10.1057/9780230380257_3

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