Dollars, Debt, and International Financial Institutions
Financial dollarization is increasingly seen as a concern because of its tendency to contribute to financial crises and output volatility. As a result the debate on financial dollarization has shifted in favor of a more proactive stance on dedollarization. While often neglected, lending from interna...
| Main Author: | |
|---|---|
| Format: | Journal Article |
| Published: |
World Bank
2012
|
| Subjects: | |
| Online Access: | http://hdl.handle.net/10986/4445 |
| id |
okr-10986-4445 |
|---|---|
| recordtype |
oai_dc |
| spelling |
okr-10986-44452021-04-23T14:02:17Z Dollars, Debt, and International Financial Institutions Yeyati, Eduardo Levy Debt emerging economies financial crises international financial institution International Financial Institutions Levy local currency local economy returns sovereign risk Financial dollarization is increasingly seen as a concern because of its tendency to contribute to financial crises and output volatility. As a result the debate on financial dollarization has shifted in favor of a more proactive stance on dedollarization. While often neglected, lending from international financial institutions is an important source of financial dollarization in emerging economies and must be considered in any dedollarization strategy. This article revisits old and new arguments in favor of international financial institution lending in the local currency and argues that any such initiative should rely, at least initially, on demand from residents seeking stable returns in units of the local consumption basket but who are reluctant to take on sovereign risk. Superior enforcement capacity enables international financial institutions to intermediate these savings, currently invested in dollarized foreign assets, back into the local economy. The international financial institutions can offer investment-grade local currency bonds and use the proceeds to dedollarize their own lending to noninvestment-grade countries, thereby reducing financial dollarization and fostering the development of local currency markets. 2012-03-30T07:12:35Z 2012-03-30T07:12:35Z 2007-01-30 Journal Article World Bank Economic Review 1564-698X http://hdl.handle.net/10986/4445 CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank World Bank Journal Article Latin America & Caribbean Mexico Chile Indonesia Philippines India |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| topic |
Debt emerging economies financial crises international financial institution International Financial Institutions Levy local currency local economy returns sovereign risk |
| spellingShingle |
Debt emerging economies financial crises international financial institution International Financial Institutions Levy local currency local economy returns sovereign risk Yeyati, Eduardo Levy Dollars, Debt, and International Financial Institutions |
| geographic_facet |
Latin America & Caribbean Mexico Chile Indonesia Philippines India |
| description |
Financial dollarization is increasingly seen as a concern because of its tendency to contribute to financial crises and output volatility. As a result the debate on financial dollarization has shifted in favor of a more proactive stance on dedollarization. While often neglected, lending from international financial institutions is an important source of financial dollarization in emerging economies and must be considered in any dedollarization strategy. This article revisits old and new arguments in favor of international financial institution lending in the local currency and argues that any such initiative should rely, at least initially, on demand from residents seeking stable returns in units of the local consumption basket but who are reluctant to take on
sovereign risk. Superior enforcement capacity enables international financial institutions to intermediate these savings, currently invested in dollarized foreign assets, back into the local economy. The international financial institutions can offer investment-grade local currency bonds and use the proceeds to dedollarize their own lending to noninvestment-grade countries, thereby reducing financial dollarization and fostering the development of local currency markets. |
| format |
Journal Article |
| author |
Yeyati, Eduardo Levy |
| author_facet |
Yeyati, Eduardo Levy |
| author_sort |
Yeyati, Eduardo Levy |
| title |
Dollars, Debt, and International Financial Institutions |
| title_short |
Dollars, Debt, and International Financial Institutions |
| title_full |
Dollars, Debt, and International Financial Institutions |
| title_fullStr |
Dollars, Debt, and International Financial Institutions |
| title_full_unstemmed |
Dollars, Debt, and International Financial Institutions |
| title_sort |
dollars, debt, and international financial institutions |
| publisher |
World Bank |
| publishDate |
2012 |
| url |
http://hdl.handle.net/10986/4445 |
| _version_ |
1764391400871297024 |