This paper shows how uncertainty about liquidity demand can lead to a high degree of dollarization in the banking system. I study a model where the demand for currency in each period is random, and where it is easier for banks to borrow in local currency in times of crisis than in dollars. Banks...

This paper evaluates welfare under optimal monetary and fiscal policy in a dynamic stochastic model of currency substitution and capital. It shows that in a partially dollarized economy, the main optimal policy results, i.e. the Friedman Rule and the zero capital tax, hold. Welfare implications...

This article illustrates how the industrial organization of a banking system affects economic growth in a partially dollarized economy. I study a model where banking competition has some potentially good and some potentially bad effects for growth. I analyze how important they are quatitatively...

This article illustrates how the industrial organization of a banking system affects economic growth in a partially dollarized economy. I study a model where banking competition has some potentially good and some potentially bad effects for growth. I analyze how important they are quatitatively...

This paper evaluates welfare under optimal monetary and fiscal policy in a dynamic stochastic model of currency substitution and capital. It shows that in a partially dollarized economy, the main optimal policy results, i.e. the Friedman Rule and the zero capital tax, hold. Welfare implications...

This paper shows how uncertainty about liquidity demand can lead to a high degree of dollarization in the banking system. I study a model where the demand for currency in each period is random, and where it is easier for banks to borrow in local currency in times of crisis than in dollars. Banks...