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

The Choice of Exchange Rate Regime and Monetary Target in Highly Dollarized Economies
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Volume/Issue:
2000/29
Series:
IMF Working Papers
Author(s):
Eduardo Borensztein, and Andrew Berg
Publisher:
INTERNATIONAL MONETARY FUND
Published Date:
February 2000
DOI:
http://dx.doi.org/10.5089/9781451844795.001
ISBN:
9781451844795
ISSN:
1018-5941
Page:
31
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.
Article

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

Author(s):
Eduardo Borensztein, and Andrew Berg
Published Date:
February 2000
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