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Chronicle of a Dollarization Foretold: Inflation and Exchange Rates Dynamics / Tomás E. Caravello, Pedro Martinez-Bruera, Iván Werning.
- Format:
- Book
- Author/Creator:
- Caravello, Tomás E.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w31763.
- NBER working paper series no. w31763
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2023.
- Summary:
- We study the effects of an anticipated dollarization, announced today but planned to be implemented at some future date, in a simple open-economy model. Motivated by the profile of countries considering dollarization we make the following assumptions. First, the government faces a scarcity of dollars to pledge for the future conversion of domestic currency. Second, without dollarization monetary policy finances a deficit via seignorage. We focus on the pre-dollarization period. Our results are as follows. First, the announcement leads to a discrete devaluation on impact. Second, after this jump the devaluation rate also rises relative to the no dollarization benchmark. Finally, the devaluation and inflation rate may rises over time.
- Notes:
- Print version record
- October 2023.
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