A simple theoretical framework for the analysis of liability dollarization

Daniel Heymann - Enrique Kawamura
Authors registered in the RePEc Author Service: Daniel Heymann and Enrique Lucio Kawamura

No 120, Econometric Society 2004 Latin American Meetings from Econometric Society

Abstract: This paper presents a simple model of debt contracts in order to analyze the conditions under which domestic residents would choose to denominate debts in ``dollars''. In the model, borrowers are producers of non-traded goods, and subject to shocks on prices. The real exchange rate varies in response to real shocks. There is a domestic unit of account; prices in terms of that unit can be shocked by a (presumably policy - induced) disturbance. Debt obligations can be denominated in either traded goods (dollarized contracts) or local currency. When real and nominal shocks are possitively correlated, dollarized contracts tend to be preferable to (non-contingent) nominal contracts when nominal shocks are large and real shocks are small

Keywords: Liability Dollarization; Nominal and Real Shocks. (search for similar items in EconPapers)
JEL-codes: F34 G15 (search for similar items in EconPapers)
Date: 2004-08-11
New Economics Papers: this item is included in nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://repec.org/esLATM04/up.9590.1081803429.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecm:latm04:120

Access Statistics for this paper

More papers in Econometric Society 2004 Latin American Meetings from Econometric Society Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F. Baum ().