Managing systemic liquidity risk in financially dollarized economies
By: prepared by Alain Ize, Miguel A. Kiguel, and Eduardo Levy Yeyati.
Contributors: Kiguel, Miguel Alberto, 1954-; Levy Yeyati, Eduardo.; International Monetary Fund. Monetary and Financial Systems Dept.
Series: IMF working paper -- WP/05/188
Publisher: International Monetary Fund, Monetary and Financial Systems Dept.
Published: 2005
Place of publication: Washington, D.C
Language: eng
Number of pages: 30
Subjects: Liquidity (Economics) -- Econometric models.; Dollar, American -- Econometric models.; Banks and banking -- Econometric models.; Lenders of last resort -- Econometric models.
Description: This paper evaluates ways to protect highly dollarized banking systems from systemic liquidity runs (such as the ones that took place recently in Argentina, Uruguay, and Paraguay). In view of the limitations of available (private or official) insurance schemes, and the distortions introduced by central bank lending of last resort (LOLR), the authors favor decentralized liquid foreign asset requirements on dollar deposits, supplemented by a scheme of "circuit breakers." The latter combines the use of limited dollar liquidity to ensure the convertibility of transactional deposits with a mechanism that automatically limits the convertibility of dollar term deposits once triggered by a predetermined decline in banks' liquidity.
Notes: "September 2005."

Includes bibliographical references (p. 29-30).

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