Events at CERGE-EI

Thursday, 11 November, 2021 | 13:00 | Macro Research Seminar | ONLINE

Husnu C. Dalgic, Ph.D. (University of Mannheim) "Financial Dollarization in Emergency Markets: Efficient Risk Sharing or Prescription for Disaster?"

Husnu C. Dalgic, Ph.D.

University of Mannheim, Germany

Meeting ID: 933 8692 4934

Passcode: 195486


Authors: Lawrence Christiano, Husnu Dalgic, Armen Nurbekyan

Abstract: We present data that suggests financial dollarization is primarily a device for reallocating business cycle income risk between different people within emerging market economies, rather than across different countries. Although we  identify sources of fragility in some aspects of dollarization, the common view that financial dollarization is a source of fragility is over-stated. We develop a simple model which formalizes the insurance view, which is consistent with the key crosscountry facts on interest rate differentials, deposit dollarization and exchange rate depreciations in recessions.

Full Text: Financial Dollarization in Emerging Markets: Efficient Risk Sharing or Prescription for Disaster?