Dollarization and financial integration

• 成果类型: Article
• 署名作者: Arellano, Cristina; Heathcote, Jonathan
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - Minneapolis; University of Minnesota System; University of Minnesota Twin Cities; National Bureau of Economic Research; Centre for Economic Policy Research - UK
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2009.08.002
• 发表日期: 2010
• 页码: 944-973
• 关键词: Exchange rate regime; Borrowing limits; dollarization; debt policy

摘要

How does a country's exchange rate regime impact its ability to borrow from abroad? We build a small open economy model in which the government responds to shocks by adjusting monetary policy and foreign borrowing. Sovereign borrowing is subject to endogenous limits, which ensure repayment when the default punishment corresponds to financial autarky. Dollarizing implies renouncing monetary policy, but can make access to international debt markets more valuable, thereby loosening borrowing constraints. This mechanism linking dollarization to financial integration is consistent with observed declines in spreads on foreign-currency debt in countries adopting the dollar or the euro. (C) 2009 Elsevier Inc. All rights reserved.