Research On Problems Of Latin’s Dollarization And De-dollarization

At the end of twentieth Century, with the Latin American countries’ financial liberalization degreeincreasing and the frequent financial and economic crisis, Latin American countries suffer a lot. in this case,Latin American countries take different degree of dollarization, the implementation of dollarization of thesecountries played a role in reducing inflation rate, keeping exchange rate stable, strengthening the contactwith American. However, dollarization has also brought certain costs in these countries, such as the centralfinancial loss, the loss of seigniorage、independent monetary policy and flexible exchange rate policy, thecentral bank loss function of ultimate lender. Entering21th Century, with the implementation of the LatinAmerican countries’ prudent fiscal policy and active monetary policy, and in recent years, exports drivingand direct investment under the action of external injection, Latin American economic develops rapidly. Atthe same time, in the background of the depreciation of the dollar, the currency appreciation in LatinAmerica is facing greater pressure, a new trend de-dollarization emerges. The international and domesticresearch mainly concentrated in the Latin American dollarization, but to the study of de-dollarization ofLatin America, whether qualitative or quantitative analysis, there is no system description, so this papercarries a comprehensive analysis on Latin America’ de-dollarization.This paper firstly introduces the performances of Latin America’ de-dollarization and points out thatthe reasons lead to de-dollarization are as follows: sustainable economic growth of Latin America, theforeign currency yield gap narrow or even reverse, the stability of the exchange rate, inflation, currencyexchange stability of Latin American countries increased, the implementation of stable monetary policy, thepessimism of America economy and the dollar crisis, Latin American left-wing forces in recent years. Thenby choosing Peru’s data from the first quarter of2000to the first quarter of2013to do empirical analysis offactors leading to latin’s de-dollarization, which take the level of national income, inflation, and USAspreads, currency exchange rate factors into consideration, especially bring the American economic growthrate into the model, the results confirm that there is a long-term equilibrium relationship between thesevariables and de-dollarization, especially America economy growth rate and de-dollarization has significantnegative correlation, Granger test also confirmed it’s caused Peru to de-dollarization. Finally, this text putsforward some suggestions about avoiding excessive dollarization and de-dollarization based on "inaction band" theory. This text also draw a conclusion that in the face of dollarization and de-dollarization of LatinAmerican countries, due to the specific circumstances of these countries, there is no measures also appliesto all countries, so these countries should base on their own actual situation, take comprehensive measuressuch as macro-economic and financial control measures to eliminate excessive dollarization andde-dollarization.