Series: IMF Working Papers
Author(s): Eduardo Levy Yeyati , and Alain Ize
Publisher: INTERNATIONAL MONETARY FUND
Publication Date: 01 March 1998
Keywords: Dollarization, financial intermediation, asset substitution, exchange rate, real exchange rate, home currency, foreign exchange
This paper presents a portfolio model of financial intermediation in which currency choice is determined by hedging decisions on both sides of a bank’s balance sheet. Minimum variance portfolio (MVP) allocat...