The Choice of Exchange Rate Regime and Monetary Target in Highly Dollarized Economies

Eduardo Borensztein and Andrew Berg ()

No 2000/029, IMF Working Papers from International Monetary Fund

Abstract: We examine the implications of high degrees of dollarization for the choice of exchange rate regime and the information content of various monetary aggregates in developing countries. We conclude that a high degree of currency substitution argues for a more fixed exchange rate regime, while asset substitution may imply that either more rigid or more flexible regimes may be appropriate. We also ask whether the most informative monetary aggregates include dollar assets. Based on an analysis of five countries, we conclude inter alia that broader aggregates that include dollar assets perform better than those that do not.

Keywords: WP; currency; exchange rate; monetary aggregate; Dollarization; currency substitution; exchange rates; financial programming; money demand; rate of exchange rate depreciation; inflation equation; dollar currency; Granger cause inflation; foreign currency assets; money targeting; exchange rate volatility; form inflation equation; misaligned exchange rate; currency holding; aggregates granger cause inflation; money aggregate; Currencies; Monetary aggregates; Exchange rate arrangements; Demand for money (search for similar items in EconPapers)
Pages: 31
Date: 2000-02-01
References: Add references at CitEc
Citations: View citations in EconPapers (46)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=3461 (application/pdf)

Related works:
Journal Article: The Choice of Exchange Rate Regime and Monetary Target in Highly Dollarized Economies (2000)
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:imf:imfwpa:2000/029

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().