Abstract

http://ssrn.com/abstract=3268
 
 

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Default Risk and Dollarization in Mexico


William C. Gruben


affiliation not provided to SSRN

John H. Welch


Lehman Brothers


JOURNAL OF MONEY, CREDIT, AND BANKING, Vol. 28, No. 3, Part 1, August 1996

Abstract:     
Most empirical evidence of dollarization in Latin America accords with the theoretical claim that increases in expected devaluation increase dollarization. But Rogers (1992a and 1992b) finds that between 1978 and 1982, relative holdings of Mexdollars were negatively related to expected devaluation. Expected returns on Mexdollar deposits, however, depended on the solvency of the banking system. We investigate these links. We find that banking system insolvency decreases Mexdollar deposit demand and increases peso deposit demand. Once these effects are controlled for, Mexdollar demand increases with expected devaluation, even between 1978 and 1982.

JEL Classification: F31, N16, N26

Accepted Paper Series





Not Available For Download

Date posted: April 22, 1998  

Suggested Citation

Gruben, William C. and Welch, John H., Default Risk and Dollarization in Mexico. JOURNAL OF MONEY, CREDIT, AND BANKING, Vol. 28, No. 3, Part 1, August 1996. Available at SSRN: http://ssrn.com/abstract=3268

Contact Information

William C. Gruben (Contact Author)
affiliation not provided to SSRN
John H. Welch
Lehman Brothers ( email )
745 Seventh Avenue
New York, NY 10019
United States
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