Taming Financial Dollarization: Determinants and Effective Policies – The Case of Uruguay

Download or read book Taming Financial Dollarization: Determinants and Effective Policies – The Case of Uruguay written by Mr. Mauricio Vargas and published by International Monetary Fund. This book was released on 2023-11-24 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: With some of the most significant levels of financial dollarization in the Western Hemisphere, Uruguay is characterized by extensive dollarization in both deposits and loans. While traditional factors like high inflation and substantial devaluations have been associated with such outcome, the enduring nature of dollarization in Uruguay also underscores the importance of structural elements. In formulating a holistic strategy to reduce dollarization, not only should there be an enhancement of the monetary policy framework aimed at maintaining low, stable inflation, but it should also consider the calibration of prudential policies such as currency-differentiated reserve requirements and foreign-currency credit repos.