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dc.contributor.authorAraújo, Aloísio Pessoa de
dc.contributor.authorLeon, Márcia Saraiva
dc.date.accessioned2008-05-13T15:30:25Z
dc.date.accessioned2010-09-23T18:56:57Z
dc.date.available2008-05-13T15:30:25Z
dc.date.available2010-09-23T18:56:57Z
dc.date.issued2002-04-01
dc.identifier.issn0104-8910
dc.identifier.urihttp://hdl.handle.net/10438/687
dc.description.abstractThe purpose of this article is to contribute to the discussion of the financial aspects of dollarization and optimum currency areas. Based on the model of self-fulfilling debt crisis developed by Cole and Kehoe [4], it is possible to evaluate the comparative welfare of economies, which either keep their local currency and an independent monetary policy, join a monetary union or adopt dollarization. In the two former monetary regimes, governments can issue debt denominated, respectively, in local and common currencies, which is completely purchased by national consumers. Given this ability, governments may decide to impose an inflation tax on these assets and use the revenues so collected to avoid an external debt crises. While the country that issues its own currency takes this decision independently, a country belonging to a monetary union depends on the joint decision of all member countries about the common monetary policy. In this way, an external debt crises may be avoided under the local and common currency regimes, if, respectively, the national and the union central banks have the ability to do monetary policy, represented by the reduction in the real return on the bonds denominated in these currencies. This resource is not available under dollarization. In a dollarized economy, the loss of control over national monetary policy does not allow adjustments for exogenous shocks that asymmetrically affect the client and the anchor countries, but credibility is strengthened. On the other hand, given the ability to inflate the local currency, the central bank may be subject to the political influence of a government not so strongly concerned with fiscal discipline, which reduces the welfare of the economy. In a similar fashion, under a common currency regime, the union central bank may also be under the influence of a group of countries to inflate the common currency, even though they do not face external restrictions. Therefore, the local and common currencies could be viewed as a way to provide welfare enhancing bankruptcy, if it is not abused. With these peculiarities of monetary regimes in mind, we simulate the levels of economic welfare for each, employing recent data for the Brazilian economy.eng
dc.language.isoeng
dc.publisherEscola de Pós-Graduação em Economia da FGVpor
dc.relation.ispartofseriesEnsaios Econômicos;446por
dc.subjectDollarizationpor
dc.subjectOptimum currency areaseng
dc.subjectSpeculative attackseng
dc.subjectDebt crisispor
dc.subjectSunspotseng
dc.titleSpeculative attacks on debts, dollarization and optimum currency areaseng
dc.typeWorking Papereng
dc.subject.areaEconomiapor
dc.contributor.unidadefgvEscolas::EPGEpor
dc.subject.bibliodataEconomiapor
dc.subject.bibliodataDolarizaçãopor
dc.subject.bibliodataEspeculaçãopor
dc.subject.bibliodataUnião monetáriapor
dc.contributor.affiliationFGV


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