- R. Gelos, Alejandro Lopez Mejia, and Marco Piñón-Farah
- Published Date:
- July 2008
Macroeconomic Implications of Financial Dollarization The Case of Uruguay
Edited by Marco Piñón, Gaston Gelos, and Alejandro López-Mejía
INTERNATIONAL MONETARY FUND
© 2008 International Monetary Fund
Production: IMF Multimedia Services Division
Typesetting: Alicia Etchebarne-Bourdin
Figures: Andrew Sylvester
Macroeconomic implications of financial dollarization: the case of Uruguay/ edited by Marco Piñón, Gaston Gelos, and Alejandro López-Mejía— Washington, D.C.: International Monetary Fund, 2008.
p. cm.—(Occasional paper, 0251-6365; 263)
Includes bibliographical references.
1. Dollarization—Uruguay. 2. Monetary policy—Uruguay. 3. Banks and banking—Uruguay. 4. Finance—Uruguay. I. Piñón, Marco. II. Gelos, Gaston. III. López-Mejía, Alejandro. IV. International Monetary Fund. V. Occasional paper (International Monetary Fund); no. 263.
HG905 .M337 2008
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Gaston Gelos and Fernanda Rossi Iriondo
Alejandro López-Mejía, Alessandro Rebucci, and Carolina Saizar
Gaston Gelos and Marco Piñón
Gaston Gelos and Marco Piñón
Gustavo Adler and Stephanie Eble
Marcos Rietti Souto
Fernando M. Gonçalves
The following conventions are used in this publication:
In tables, a blank cell indicates “not applicable,” ellipsis points (…) indicate “not available,” and 0 or 0.0 indicates “zero” or “negligible.” Minor discrepancies between sums of constituent figures and totals are due to rounding.
An en dash (-) between years or months (for example, 2005-06 or January-June) indicates the years or months covered, including the beginning and ending years or months; a slash or virgule (/) between years or months (for example, 2005/06) indicates a fiscal or financial year, as does the abbreviation FY (for example, FY2006).
“Billion” means a thousand million; “trillion” means a thousand billion.
“Basis points” refer to hundredths of 1 percentage point (for example, 25 basis points are equivalent to ¼ of 1 percentage point).
As used in this publication, the term “country” does not in all cases refer to a territorial entity that is a state as understood by international law and practice. As used here, the term also covers some territorial entities that are not states but for which statistical data are maintained on a separate and independent basis.
In recent years, the International Monetary Fund has set itself the challenge of becoming a global center of excellence on international finance and its linkages with broader macroeconomic phenomenons, including growth, inflation, investment, currency values, and overall stability.
The analytical work brought together here is a good example of this new emphasis. It parallels the shift in the IMF’s relationship with Uruguay, which has moved on from dealing with the aftermath of the 2002 crisis to understanding underlying economic structures and transmission mechanisms in a heavily dollarized financial system, and bringing to the fore related policy issues. The questions posed in this volume are central to the conduct of macroeconomic policy: How much room to maneuver does the central bank of a dollarized financial system have to influence inflation expectations and dynamics? Through what channels is monetary policy transmitted, and what effect does policy credibility have on the degree of dollarization? What level of international reserves is prudent?
I would like to thank all concerned for their contributions, including the Uruguayan authorities.
The opinions expressed in this paper are solely those of its authors and do not necessarily reflect the views of the International Monetary Fund, its Executive Directors, or national authorities.
Western Hemisphere Department
International Monetary Fund
Banco Hipotecario del UruguayBROU
Banco de la Repɐblica Oriental del UruguayCAR
Capital adequacy ratioCPI
Consumer price indexEDP
Expected default probabilityEMBI
Emerging Markets Bond Index (JPMorgan)FIML
Full-information maximum likelihoodFSAP
Financial Sector Assessment Program (IMF)GDP
Gross domestic productGMM
Generalized method of momentsHH
London Interbank Offered RateNPV
Net present valueOLS
Ordinary least squaresPPI
Producer price indexUBI
Uruguayan Bond IndexVAR
Vector error correctionVIX
Volatility Index (Chicago Board Options Exchange)