Carlos Arteta (2003), "Are Highly Dollarized Countries More Prone to Costly Crises?" (Berkeley: U.C. Berkeley xerox).
Posted by DeLong at May 17, 2003 10:25 AM | TrackBackIn this paper, I aim to present some stylized facts on the links between financial dollarization and crises, in order to answer two related questions: Does high dollarization of deposits and credits increase the likelihood of banking crises and currency crashes? And does it make banking crises and currency crashes more costly? To do so, I employ the first comprehensive database on financial dollarization for a large sample of developing and transition economies, previously used in Arteta (2002), as well as a variety of estimation methods and an extensive battery of sensitivity tests.
Extensive econometric analysis finds little evidence of any particular link between high bank dollarization and the likelihood of banking crises or currency crashes. In particular, the presumption that high dollarization heightens the probability of banking or currency turmoil doe snot receive empirical support.... [W]hile... banking crises and currency crashes are contractionary, there is no evidence that highly dollarized countries suffer more costly crises or crashes... deposit dollarization may act as a buffer.... On the other hand... sharp devaluations have more severe contractionary effects than sharp depreciations: Large downward movements of the nominal exchange rate under managed regimes lead to more protracted output contractions than those under floating regimes.... [M]acroeconomic and exchange rate policies are far more important than bank dollarization in determining crisis risks and costs...
I've been out of academia too long -- what are "stylized facts"?
Posted by: Curt Wilson on May 17, 2003 02:07 PMThey are the lowest common denominator of Econospeak and Administration Newspeak.
O.k., I can come up with a less cynical variant. I guess what the phrase is meant to refer to are significant facts that have shaped the authorīs view and are therefore attributed more relevance than other random facts available for looking at - rather than the economist doing the styling.
Posted by: Joerg Wenck on May 18, 2003 06:18 AMI found some articles on dollarization at the Federal Reserve Bank of Minneapolis.
"http://www.minneapolisfed.org/research/qr/qr2531.pdf"
I was anxious to find out what Rudiger Dornbusch had to say on the subject since he was such an enthusiastic supporter of the idea. Dornbush died last year, about eight months after the total collapse of the Argentine gov't/economy, and here
"http://www.imf.org/external/pubs/ft/survey/2002/032502.pdf#page=13"
is an interview with him. Basically he confines himself to trashing the political decision makers, which IMO is a cop-out.
Posted by: James R MacLean on May 18, 2003 10:22 AMMmmm...doe snot.
Stylized facts are often key empirical characteristics of a set of (usually chronological) economic series. They are often meant to be simple yet reliable statistical facts that one proposes as a base for further -more sophisticated- empirical research or subsequent modelling, either by the author herself or another author.
Posted by: Jean-Philippe Stijns on May 19, 2003 02:22 PM