Chapter

Exchange Rate Pass-through and Partial Dollarization: Is There a Link?

José Antonio González

in Latin American Macroeconomic Reforms

Published by University of Chicago Press

Published in print July 2003 | ISBN: 9780226302676
Published online February 2013 | e-ISBN: 9780226302683 | DOI: http://dx.doi.org/10.7208/chicago/9780226302683.003.0003
Exchange Rate Pass-through and Partial Dollarization: Is There a Link?

Show Summary Details

Preview

This chapter examines how dollarization affects the transmission channel of nominal exchange rate fluctuations into domestic inflation for thirteen countries in Latin America between 1980 and 2000. It finds no relationship between the level of dollarization and the degree of pass-through of the nominal exchange rate into domestic inflation. A higher degree of dollarization between countries does not lead to higher pass-through. Therefore, more dollarized economies do not necessarily have less ability to influence their real exchange rates through nominal exchange rate movements. Within the same country, an increase in dollarization does not hinder a country's ability to adjust its exchange rate through nominal fluctuations. Higher dollarization does not necessarily mean higher dollar-indexation, as is commonly believed. The price index is not determined by the unit of accounting but by internal market conditions.

Keywords: dollarization; nominal exchange rates; domestic inflation; Latin America

Chapter.  10493 words.  Illustrated.

Subjects: Economic Development and Growth

Full text: subscription required

How to subscribe Recommend to my Librarian

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.