Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/297784 
Year of Publication: 
2023
Series/Report no.: 
Serie Documentos de Trabajo No. 855
Publisher: 
Universidad del Centro de Estudios Macroeconómicos de Argentina (UCEMA), Buenos Aires
Abstract: 
We analyze a recent paper that claims that dollarizing an economy in the presence of a "dollar shortage" will provoke an immediate sharp reduction in real output and welfare. We find many problems with the model that supports this conclusion: confusion about the nature of a dollar shortage and its practical implications, invalid assumptions, invariant calibration in the presence of a regime change and lack of empirical testing. In our opinion, the paper does not make a valuable contribution to the dollarization debate nor provide useful guidance to policymakers. The proposed model is based on unrealistic assumptions and its predictions are contradicted by the available evidence. A more promising and useful line of research would have been to investigate what happens to a dollarized economy in a scenario of exchange rate overshooting and how it compares in relation to other stabilization plans.
Subjects: 
Dollarization
Dynamics
Dollar shortage
JEL: 
E10
E42
E50
F30
F33
Document Type: 
Working Paper

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