01781cas a2200253 a 4500 AALejournalIMF000571 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451844634 1018-5941 BD-DhAAL BD-DhAAL Levy Yeyati, Eduardo. Dollarization of Financial Intermediation : Causes and Policy Implications / Eduardo Levy Yeyati, Alain Ize. Washington, D.C. : International Monetary Fund, 1998. 1 online resource (48 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper presents a portfolio model of financial intermediation in which currency choice is determined by hedging decisions on both sides of a bank's balance sheet. Minimum variance portfolio (MVP) allocations are found to provide a natural benchmark to estimate the scope for dollarization of bank deposits and loans as a function of macroeconomic uncertainty. Dollarization hysteresis is shown to occur when the expected volatility of the inflation rate is high in relation to that of the real exchange rate. The evidence shows that MVP dollarization generally approximates actual dollarization closely for a broad sample of countries, and policy implications are explored. Mode of access: Internet Ize, Alain. IMF Working Papers; Working Paper ; No. 1998/028 Full text available on IMF http://elibrary.imf.org/view/journals/001/1998/028/001.1998.issue-028-en.xml IMF e-Library