Dollarization and default risk: a brief note

Emilio Ocampo and Nicolás Cachanosky

No 871, CEMA Working Papers: Serie Documentos de Trabajo. from Universidad del CEMA

Abstract: In this brief note, we evaluate the conclusions of a recent paper by Lopez Almirante and Neumeyer (2024). Simulations of a well-known model calibrated for Ecuador led them to conclude that dollarization can lead to a higher probability of a sovereign default and that only a high inflation rate would make it a welfare enhancing option for a non-dollarized economy. We find data misspecification and erroneous assumptions invalidate the results of the analysis.

Keywords: Dollarization; Default Risk; Latin America. (search for similar items in EconPapers)
JEL-codes: E31 E52 E58 F31 F32 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2024-06
New Economics Papers: this item is included in nep-fdg, nep-mon and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:cem:doctra:871

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