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Taming Financial Dollarization: Determinants and Effective Policies – The Case of Uruguay
Author:
Mr. Mauricio Vargas https://isni.org/isni/0000000404811396 International Monetary Fund

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Jesus Sanchez
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Series:
IMF Working Papers
Volume/Issue:
Volume 2023: Issue 244
Language:
English
Publication Date:
24 Nov 2023
DOI:
https://doi.org/10.5089/9798400258428.001
ISBN:
9798400258428
ISSN:
1018-5941
Pages:
36
Keywords:
Dollarization; Prudential Policies; Monetary Policy; Uruguay; Peru.; deposit dollarization; dollarization trend; credit repo; financial dollarization; dollarization level; Inflation; Reserve requirements; Exchange rates; Currencies; Global; South America; Caribbean; Western Hemisphere
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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With some of the most significant levels of financial dollarization in the Western Hemisphere, Uruguay is characterized by extensive dollarization in both deposits and loans. While traditional factors like high inflation and substantial devaluations have been associated with such outcome, the enduring nature of dollarization in Uruguay also underscores the importance of structural elements. In formulating a holistic strategy to reduce dollarization, not only should there be an enhancement of the monetary policy framework aimed at maintaining low, stable inflation, but it should also consider the calibration of prudential policies such as currency-differentiated reserve requirements and foreign-currency credit repos.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund