Warianty tytułu
Języki publikacji
Abstrakty
The objective of this paper is to point out that dollarization may be used as a signaling device. To this end, we introduce into a standard monetary policy model two types of governments: good and bad. Information is asymmetric, the government type is uncertain and the policy of the bad government is suboptimal. This uncertainty does not allow the good government to achieve the first best outcome even though it conducts optimal policy. Since, the bad government would never dollarize, the good government by dollarizing reduces uncertainty about the type of government and achieves the first best allocation. Here, unlike in models emphasizing the time inconsistency motive for dollarization, it does not change the actual policy. Thus, dollarization plays the role of a signaling device rather than a commitment device. (original abstract)
Twórcy
autor
- National Bank of Poland; Warsaw School of Economics
Bibliografia
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Typ dokumentu
Bibliografia
Identyfikatory
Identyfikator YADDA
bwmeta1.element.ekon-element-000171264071