The IMF Working Papers series is designed to make IMF staff research available to a wide audience. With nearly 300 released each year, working papers cover a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
This paper examines the pattern of dollarization in Latin America, focusing on the experience of five countries (Argentina, Bolivia, Mexico, Peru and Uruguay) during 1970-1993. It presents evidence on the relative size of dollarization, the allocation of foreign currency deposits, and the behavior of money velocity. The discussion stresses the role of institutional factors, macroeconomic conditions, and the dynamics of money demand In shaping the dollarization process; it also highlights the shortcomings of indicators frequently employed to analyze the phenomenon. The paper provides a brief critical assessment of the empirical literature on dollarization, and identifies areas where further research seems warranted.