"Closet dollars" and taxes

Arbeitspapier

Israelis commonly hold substantial foreign currency balances at home. This paper examines the phenomenon of these "closet dollars." We show that closet dollars are attractive only if there exists a positive probability that domestic deposits will pay negative dollar rates of return. If such negative rates of return are associated with changes in the depositor's tax bill, then low-tax consumers are most attracted to closet dollars. In addition we show that potential central bank default and transactions costs will tend to increase the volume of closet dollars.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Diskussionsbeiträge - Serie II ; No. 77

Classification and Topics

• Classification: Wirtschaft

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Franke, Günter ; Benninga, Simon
• Event: Veröffentlichung
• (who): Universität Konstanz, Sonderforschungsbereich 178 - Internationalisierung der Wirtschaft
• (where): Konstanz
• (when): 1989

Further information

• Handle: http://hdl.handle.net/10419/101601
• Last update: 10.03.2025, 11:43 AM CET