We use a sample of emerging markets with different degrees of dollarization and find that the pass-through in highly dollarized economies is higher but also more asymmetric than in less dollarized ones: we define asymmetric pass-through as the presence of a negative pass-through coefficient during economic downturns. This asymmetry stems from the negative balance-sheet effect that dominates the competition effect of real exchange rate depreciations.

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We use a panel dataset on industrial employment, trade and liability dollarization for 9 Latin American countries in order to test whether real exchange rate fluctuations have a significant impact on employment and whether it varies with the degree of dollarization. Our evidence supports that real depreciations have a positive effect on employment growth, but it is reversed as dollarization increases. For high levels of dollarization, the overall impact of real depreciations can be negative.

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In this paper I study the pass-through of nominal exchange rate changes to the price of imported goods in developing countries. The results indicate that 75% of changes in the exchange rate are passed-through to the domestic currency price of imported goods within one quarter. Complete pass-through is attained within one year. There is no evidence that exchange rate pass-through has declined over time.

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Financial dollarization is a major problem in many Latin American countries concerning systemic financial fragility; blunt dedollarization measures simply repressing dollarization may easily fail to solve fragility, at best fostering risky short-term debt and at worst provoking massive financial disintermediation and crisis. This paper analyzes the sources of liability dollarization and identifies the failures leading to excess that call for policy intervention in a portfolio framework.

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We build an overlapping generation model of a two-sector small open economy. Because firms are subject to a borrowing constraint and there is a currency mismatch in the non-tradable sector, multiple equilibria may arise at a given point in time. We show that, under certain conditions, the evolution of the productive structure and of the non-tradable sector's balance sheets along an equilibrium path eventually leads to a financially fragile state with possible balance of payments crises.

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