Exchange rate and inflation dynamics in dollarized economies
We use a panel of a hundred-plus countries with differing degrees of dollarization to perform an empirical analysis of the effects of exchange rate depreciations in economies with high liability dollarization. The results qualify the common view that countries with higher dollarization exhibit highe...
| Autores: | , , |
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| Tipo de recurso: | artículo |
| Fecha de publicación: | 2008 |
| País: | España |
| Institución: | Universidad de Navarra |
| Repositorio: | Dadun. Depósito Académico Digital de la Universidad de Navarra |
| Idioma: | inglés |
| OAI Identifier: | oai:dadun.unav.edu:10171/114709 |
| Acceso en línea: | https://hdl.handle.net/10171/114709 |
| Access Level: | acceso abierto |
| Palabra clave: | Inflation pass-through Dollarization Balance-sheet effect Developing economies |
| Sumario: | We use a panel of a hundred-plus countries with differing degrees of dollarization to perform an empirical analysis of the effects of exchange rate depreciations in economies with high liability dollarization. The results qualify the common view that countries with higher dollarization exhibit higher inflation pass-through. We show that large depreciations tend to generate a negative impact on the pass-through coefficient, this impact being more intense the higher the level of dollarization of the economy. We interpret this as evidence that, in highly dollarized economies, the classic inflationary effects of a real depreciation -higher internal demand and imported inflation- can be offset or diminished by both the larger financial costs and the balance-sheet effect, especially if the depreciation is "large". Additionally, the exchange rate regime is shown to matter: countries with fixed exchange rates suffer more noticeable balance-sheet effects of large depreciations |
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