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Playing Monopoly with the DevilDollarization and Domestic Currencies in Developing Countries$
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Manuel Hinds

Print publication date: 2006

Print ISBN-13: 9780300113303

Published to Yale Scholarship Online: October 2013

DOI: 10.12987/yale/9780300113303.001.0001

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The Counterfactuals

The Counterfactuals

Chapter:
(p.189) Chapter 10 The Counterfactuals
Source:
Playing Monopoly with the Devil
Author(s):

Manuel Hinds

Publisher:
Yale University Press
DOI:10.12987/yale/9780300113303.003.0011

This chapter focuses on two counterfactuals to the analysis of crises, the first of which is the behavior of foreign currency deposits during the crises of countries with local currencies. In all cases, they either kept on increasing while those in local currencies were falling fast, or, when the run on local currencies was already threatening the banking system, they fell at a much slower pace than the local currency deposits. The chapter discusses how, in Ecuador, the run on the banks stopped and funds returned to the banks as soon as the government announced the dollarization of the country. The second counterfactual is the behavior of countries using international currencies that they do not control when facing problems similar to those which have created grave crises in countries with their own currencies. Panama and Ireland are two examples of such countries.

Keywords:   counterfactuals, foreign currency, local currencies, banking system, dollarization

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