Front Matter

Front Matter

R. Gelos, Alejandro Lopez Mejia, and Marco Piñón-Farah
Published Date:
July 2008
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    Macroeconomic Implications of Financial Dollarization The Case of Uruguay

    Edited by Marco Piñón, Gaston Gelos, and Alejandro López-Mejía


    Washington, D.C.


    © 2008 International Monetary Fund

    Production: IMF Multimedia Services Division

    Typesetting: Alicia Etchebarne-Bourdin

    Figures: Andrew Sylvester

    Cataloging-in-Publication Data

    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.

    ISBN 978-1-58906-727-1

    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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    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.

    Anoop Singh


    Western Hemisphere Department

    International Monetary Fund



    Banco Hipotecario del Uruguay


    Banco de la Repɐblica Oriental del Uruguay


    Capital adequacy ratio


    Consumer price index


    Expected default probability


    Emerging Markets Bond Index (JPMorgan)


    Full-information maximum likelihood


    Financial Sector Assessment Program (IMF)


    Gross domestic product


    Generalized method of moments




    London Interbank Offered Rate


    Net present value


    Ordinary least squares


    Producer price index


    Uruguayan Bond Index


    Vector autoregression


    Vector error correction


    Volatility Index (Chicago Board Options Exchange)

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