Intro -- Contents -- I. INTRODUCTION -- II. TRENDS IN FINANCIAL DOLLARIZATION -- III. FINANCIAL DOLLARIZATION AS A RATIONAL RESPONSE TO INFLATION -- IV. THE ROLE OF CREDIT RISK -- V. CONCLUDING REMARKS -- APPENDIX I -- APPENDIX II -- REFERENCES.

The shift to inflation targeting has contributed to the relatively low inflation observed in some emerging market economies although, as noted by many economists, the preconditions required for a successful implementation were not in place. The existence of managed exchange rate regimes, a...

This paper tests several explanations for financial dollarization (FD), with an emphasis on Latin America. The results provide evidence that FD is a rational response to inflation uncertainty. The paper builds on previous research by finding that an exchange rate policy biased towards currency...

This paper evaluates ways to protect highly dollarized banking systems from systemic liquidity runs (such as the ones that took place recently in Argentina, Uruguay, and Paraguay). In view of the limitations of available (private or official) insurance schemes, and the distortions introduced by...