This paper examines if dollarization has had a positive impact on the macroeconomic stability of Latin American … countries. Dollarization refers to either the official or unofficial replacement of local currencies with the U.S. dollar …. Currently four Latin American countries are officially dollarized and the rest experience varying levels of unofficial …

This paper documents that an appreciation of the U.S. dollar is associated with a reduction in the supply of commercial … and industrial loans by U.S. banks. An increase in the broad dollar index by 2.5 points (one standard deviation) reduces U … secondary market where prices fall and liquidity worsens when the dollar appreciates, with stronger effects for riskier loans …