Dollarization, bailouts, and the stability of the banking system

Arbeitspapier

Central bank policy suffers from time-inconsistency when facing a banking crisis : A bailout is optimal ex post but ex ante it should be limited to control moral hazard. Dollarization provides a credible commitment not to help at the cost of not helping even when it would be ex ante optimal to do so. Dollarization is good when the costs of establishing a reputation for the central bank are high, monitoring effort by the banker is important in improving returns, and when the cost of liquidating projects is moderate. However, a very severe moral hazard problem could make dollarization Undesirable. The results obtained are applied to assess the desirability of dollarization in a range of countries and the potential role of the IMF as International LOLR.

Objekt anzeigen

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: HWWA Discussion Paper ; No. 185

Klassifikation und Themen

• Klassifikation: Wirtschaft
• Thema: Währungssubstitution ; US-Dollar ; Geldpolitik ; Bank ; Kleines-offenes-Land ; Theorie

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Gale, Douglas ; Vives, Xavier
• Ereignis: Veröffentlichung
• (wer): Hamburg Institute of International Economics (HWWA)
• (wo): Hamburg
• (wann): 2002

Weitere Informationen

• Handle: http://hdl.handle.net/10419/19347