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Endogenous financial dollarization and exchange rate policy

Chang, Roberto and Velasco Branes, Andres (2007) Endogenous financial dollarization and exchange rate policy. Journal of Policy Reform, 8 (4). pp. 263-280. ISSN 1384-1289

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Identification Number: 10.1080/13841280500387182

Abstract

We develop a simple model of an economy in which domestic agents borrow and lend from each other in either home or foreign currency. Nominal wage rigidity implies that portfolios are chosen to offset the real variability of labor income. Portfolio choices, in turn, affect the potency of monetary policy, and the mapping from exogenous shocks to aggregate outcomes. The model sheds light on the determinants and implications of financial dollarization, its interaction with monetary policy, and other current issues.

Item Type: Article
Official URL: https://www.tandfonline.com/toc/gpre19/current
Additional Information: © 2007 Taylor & Francis
Divisions: School of Public Policy
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Subjects: H Social Sciences > HG Finance
JEL classification: F - International Economics > F3 - International Finance > F31 - Foreign Exchange
F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics
Date Deposited: 11 Oct 2019 14:15
Last Modified: 19 Nov 2019 13:52
URI: http://eprints.lse.ac.uk/id/eprint/102065

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