We develop a small open economy general equilibrium model with sticky prices and partial dollarization -a situation … inflation and the output gap in which a trade-off, which depends on the degree of dollarization, arises endogenously due to the … presence of foreign interest rate shocks. We use this framework to show analytically how higher degrees of dollarization induce …

rates, a lower degree of dollarization lessens the negative impact on output and investment, since there is a smaller … percent of the output and investment drop in Peru following the Russian Crisis, and a reduction in debt dollarization would …

The most salient feature of financial dollarization, and the one that causes more concern to policy makers, is its … persistence: even after successful macroeconomic stabilizations, dollarization ratios often remain high. In this paper we claim …

Peru has successfully pursued a market-driven financial de-dollarization during the last decade. Dollarization of … credit and time and saving deposits. The analysis presented in this paper confirms that de-dollarization has been driven by … requirements), and the development of the capital market in soles. Further de-dollarization efforts could focus on these three …