Systemic risk, dollarization, and interest rates in emerging marketsa panel-based approach

Resumo

This study investigates the impact of systemic risks and financial dollarization on real interest rates in emerging economies. Higher systemic risks induce both higher real interest rates and increased dollarization. Using appropriate instruments for the dollarization ratio, the study overcomes the simultaneous equation problem and correctly estimates a negative coefficient for the dollarization ratio in the interest rate equation. It confirms the theoretical prediction that a strategy of 'dedollarizing' the economy will raise the equilibrium domestic real interest rate if the strategy fails to address fundamental macroeconomic risks. Even so, it also finds that this effect is small, after controlling for the risks of dilution and default. The results bring to light the systemic-risk reasons for high interest rates in emerging economies-025EFand contribute to evaluating the difficulties of dedollarization policies.

Ficha do documento

Tipo

Artigo científico

Ano

2009

Instituição

Oxford Univ Press

Fonte

Repositório da FGV

Idioma

Inglês

Acesso

Acesso restrito

DOI

10.1093/wber/lhn012

Identificador

oai:repositorio.fgv.br:10438/23122

Palavras-chave

RiskDollarizationInterest ratesEmerging marketsFinançasDolarizaçãoRisco