Financial Dollarization

AGUSTIN CARSTENS Deputy Managing Director, International Monetary Fund, USAJORGE CAYAZZO Senior Financial Sector Expert, Monetary and Financial Systems Department, International Monetary Fund, USAROBERTO CHANG Professor of Economics, Rutgers University and Research Associate, National Bureau of Economic Research, USAKEVIN COWAN Senior Economist, Central Bank of Chile, ChileOSCAR DANCOURT Acting Governor, Central Reserve Bank of Peru, PeruJULIO DE BRUN Director, Center for Banking and Financial Studies, Universidad ORT Uruguay and Executive Director, Private Banks Association, UruguayAUGUSTO DE LA TORRE Senior Regional Financial Sector Advisor, Latin American and the Caribbean Regional Office, The World Bank, USAFRANCISCO DE PAULA GUTIERREZ Governor, Central Bank of Costa Rica, Costa RicaANTONIO IGNACIO GARCIA PASCUAL Economist, Monetary and Financial Systems Department, International Monetary Fund, USAFRANCISCO GRIPPA Senior Economist, Monetary Division, Banco Central de Reserva del Perú, PeruEVA GUTIERREZ Economist, Policy Review Department, International Monetary Fund, USADANIEL C. HARDY Deputy Division Chief, Monetary and Financial Systems Department, International Monetary Fund, USALUIS OSCAR HERRERA Director, Financial Policy Department, Central Bank of Chile, ChileSOCORRO HEYSEN Deputy Division Chief, Monetary and Financial Systems Department, International Monetary Fund, USAALLISON HOLLAND Debt Management Advisor, Monetary and FinancialSystems Department, International Monetary Fund, USASTEFAN INGVES Governor, Sveriges Riksbank, SwedenCLAUDIO IRIGOYEN Chief Economist, Central Reserve Bank of Argentina, ArgentinaOLIVER JEANNE Deputy Division Chief, Research Department, International Monetary Fund, USAMIGUEL KIGUEL Academic Advisor, Financial Stability Center and Professor Universidad Torcuato Di Tella, ArgentinaLEONARDO LEIDERMAN Professor, Berglas School of Economics, Tel Aviv University, IsraelGERARDO LICANDRO Director, Research Department, Central Bank of Uruguay, UruguayRODOLFO MAINO Senior Economist, Monetary and Financial Systems Department, International Monetary Fund, USAJUAN ANTONIO MORALES Governor, Central Bank of Bolivia, BoliviaCHRISTIAN MULDER Deputy Division Chief, Monetary and Financial Systems Department, International Monetary Fund, USAMASAHIRO NOZAKI Economist, Western Hemisphere Department, International Monetary Fund, USAERIC PARRADO Advisor of the Financial Policy Division, Central Bank of Chile, ChileCEYLA PAZARBASIOGLU Division Chief, International Capital Markets Department, International Monetary Fund, USAROBERT RENNHACK Division Chief, Western Hemisphere Department, International Monetary Fund, USAMARKUS RODLAUER Senior Advisor, Western Hemisphere Department, International Monetary Fund, USARENZO ROSSINI General Manager, Central Reserve Bank of Peru, PeruKLAUS SCHMIDT-HEBBEL Chief of Economic Research, Central Bank of Chile and Professor, Catholic University of Chile, ChilePHILIP TURNER Head of the Secretariat Group, Monetary and Economic Department, Bank for International Settlements, Switzerland

• Preface; O.Dancourt & S.Ingves Introduction; A.Armas, A.Ize & E.Levy-Yeyati PART I: FINANCIAL DOLLARIZATION: ROOTS AND DYNAMICS Financial Dollarization Equalibria: A Framework for Policy Analysis; A.Ize Comments on Chapter 2; O.Jeanne Financial De-dollarization: Is it for Real? A.Ize & E.Levy-Yeyati Comments on Chapter 3; R.Chang Financial Dollarization in Latin America; R.Rennhack & M.Nozaki Comments on Chapter 4; K.Cowan PART II: MONETARY AND EXCHANGE RATE MANAGEMENT Exchange Rate and Monetary Management in a Partially Dollarized Economy; L.Leiderman, R.Maino & E.Parrado Targeting Inflation in a Dollarized Economy: The Peruvian Experience; A.Armas & F.Grippa Discussants; K.Schmidt-Hebbel PART III: PRUDENTIAL MANAGEMENT Controlling Currency Mismatches in Emerging Economies; P.Turner Prudential Management in a Partially Dollarized Economy: Toward Internationally Accepted Best Practices; J.Cayazzo, A.I.G.Pascual, E.Gutierrez & S.Heysen Managing Systematic Liquidity Risk in a Dollarized Economy; A.Ize, M.Kiguel & E.Levy-Yeyati To Hell and Back: Crisis Management in a Dollarized Economy: The Case of Uruguay; J.de Brun & G.Licandro Discussant; P.Turner PART IV: PROMOTING THE LOCAL CURRENCY Can Indexed Debt Absolve Original Sin? Going Indexed or is Self-Flagellation Needed? A.Holland & C.Mulder De-dollarizing: The Gentle Way or the Hard Way? D.C.Hardy & C.Pazarbasioglu Discussants; A.de La Torre, L.Oscar Herrera & C.Irigoyen PART V: THE ROUTE AHEAD Summary of Round Table Discussion; A.Carstens, F.de Paula Gutierrez, L.Leiderman, J.A.Morales, M.Rodlauer & R.Rossini

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