Growth and Banking Structure in a Partially Dollarized Economy

Carlos Machicado Salas

No 02/2007, Development Research Working Paper Series from Institute for Advanced Development Studies

Abstract: 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 and, surprisingly, they do not seem to matter much. The main reason for this is that while competition leads banks to offer consumers a "better deal" on their deposits, this does not lead to a large increase in the savings rate. The effect depends on the main structural parameter values of the economy. In particular, if there is a high demand for liquidity insurance. I calibrate the model for the Bolivian economy and show that the growth rates under both systems are not significantly different.

Keywords: General equilibrium and growth; Dollarization; Banking; Industrial Organization (search for similar items in EconPapers)
JEL-codes: D50 F31 G21 L10 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2007-01
New Economics Papers: this item is included in nep-ban and nep-fdg
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Persistent link: https://EconPapers.repec.org/RePEc:adv:wpaper:200702

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