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Though the early 1990s may have been characterized by financial optimism, Argentina was in a recession as Brazil's 1998 monetary crisis sent shockwaves across the regional and global markets. Travel north to Ecuador and there was a very different financial perspective. In 2000, Ecuador made the US dollar its currency, bringing the country stability and growth. Explore the foreign exchange paths and policies the countries took to address their economic challenges, and what these decisions meant for global businesses operating in each country.

Foreign currency debt is considered a source of financial instability in emerging markets. We propose a theory in which liability dollarization arises from an insurance motive of domestic savers. Since financial crises are associated to depreciations, savers ask for a risk premium when saving in local currency. This force makes domestic currency debt expensive, and incentivizes borrowers to issue foreign currency debt. Providing ex post support to borrowers can alleviate the effect of the crisis on savers’ income, lowering their demand for insurance, and, surprisingly, it can reduce ex ante incentives to borrow in foreign currency.

The economic sanctions have stirred the entire trade, financial, commercial, and economic architecture, prompting a chorus call to find-out an alternative currency to trade. The global geo-economic landscape is witnessing a change with emerging markets coordinating their policy and operational interventions. The predominance of the dollar is challenged with trade in local and alternate currencies. India, with its rising geo-strategic status, is exploring newer methods and instruments to settle international payments. These include trading, exchanging, and settling international trade transactions in Indian rupees (INR), promoting digital means like the Unified Payments Interface (UPI) for global trade and commerce, and introducing digital currencies to safeguard national interests. The paper discusses the challenges before India for the internationalization of its INR. All these initiatives are aimed at bypassing sanctions thus leading to de-dollarization in the world economy. The paper elucidates India's quest for alternatives and to de-dollarize in the context of the evolving global geo-economic landscape and concludes it may achieve limited access in the absence of required economic fundamentals.

Partial dollarization is a significant phenomenon in the banking sectors of many developing countries, yet evidence on its spread through bank branch networks remains scarce. This paper investigates interregional capital flows within Cambodia’s banking system, characterized by the coexistence of multiple currencies. Using branch-level deposit and loan data, we developed a measure of the regional fund flows to fit the banking sector for developing countries. Our findings reveal that excess funds from deposits in Phnom Penh and wholesale funding significantly cover lending across provincial regions for both United States dollars and riels. However, banks reallocate funds in riel less actively, despite recent increases in riel deposits. Regional differences in loan and deposit demand between currencies further highlight distinct patterns. This study underscores the need to understand currency-specific trends to promote local currency usage and enhance financial inclusion in dollarized economies.

Available studies suggest that fiscal policy measures aimed at increasing disposable income growth may have an impact on inflation. As inflation in Montenegro in 2022 was higher compared to the euro area, several studies were conducted to estimate the impact of external and domestic inflation factors. They identified a positive relationship between external factors (changes in import prices) and domestic factors (fiscal policy measures), as well as between these factors and inflation. However, they did not quantify the impact of any component, particularly of the fiscal programs implemented in Montenegro. This study aims to estimate the effects of fiscal policy programs on growth in disposable income implemented in 2022, which in turn led to increased household deposit growth. The empirical analysis based on estimated correlation coefficients between household deposits’ annual change, import prices, and CPI in Montenegro (yearly data from 2014 to 2024) shows a strong positive linear relationship between changes in household deposits and CPI and also between changes in import prices and CPI, with a stronger correlation between change in import prices and CPI. This leads to the conclusion that deposit and import price growth influence inflation, with different impacts on its intensity. To estimate the impact of fiscal measures on inflation in Montenegro in 2022, we apply an accounting approach and use a dynamic mathematical model based on the quantitative theory of money. The study shows that inflation in Montenegro in 2022 was partly driven by household deposit growth, influenced by wage growth (in the part where wages grew above productivity growth), which contributed to half of the rate of price growth. The growth in prices of imported products contributed the remaining half of the inflation. The increased disposable income led to growth in demand deposits and time deposits of the households (up to one-year time deposits may be used as transaction money) which, according to the quantitative theory of money, led to price growth as it was not followed by similar production growth. During the same period, net public debt increased, which was associated with declining reserves financed through external borrowing in earlier periods, explaining the source of money supply growth. This study contributes to the literature by offering an additional approach to analyzing short-term inflation sources in dollarized countries during a short period or after specific fiscal instruments have been implemented. The accounting approach, combined with a mathematical dynamic model, provides the opportunity to investigate inflation determinants in more detail, giving a more in-depth view than the analysis conducted by applying the standard econometric models.

Abstract This article explores the role of China’s currency, the renminbi (RMB), in Brazil, analyzing how the country positions itself in the shift toward alternative currencies to the U.S. dollar amidst changing global monetary power. It addresses three key questions: How widely is the RMB used in Brazil’s economy? What institutional measures support RMB adoption in Brazil? And what are the implications of this engagement for Brazil’s role in the international monetary and financial system? Findings indicate a modest but growing RMB integration in Brazil. Rather than embarking on a de-dollarization process, Brazil appears to be employing an incremental approach – one that leverages selective institutional measures to diversify its financial risks while preserving its strategic ties with the dominant global currency.

How do emerging market corporates fare during periods of currency depreciation? We find that nonfinancial firms that exploit favorable global financing conditions to issue U.S. dollar bonds and build cash balances are also those whose share price is most vulnerable to local currency depreciation. In particular, firms’ vulnerability to currency depreciation derives less from the foreign currency debt as such, and more from the cash balances that are built up by using foreign currency debt. Overall, our results point to a financial motive for dollar bond issuance by emerging market firms in carry trade–like transactions that leave them vulnerable in an environment of dollar strength. This paper was accepted by Gustavo Manso, finance.

A random search-based model is proposed to study the valuation of cryptocurrency. We provide a unique approach to valuing cryptocurrency according to people’s acceptance probability of cryptocurrency. Although cryptocurrency is generally considered without intrinsic value, it can have value in an exchange economy. Cryptocurrency has shown huge potential as a future payment system to replace the US dollar’s position in international trade, our model, however, indicates that the value of cryptocurrency is fundamentally unstable, and thus, it has a long way to go before fulfilling its mission.

This study aims to examine the consequences of dollarization on the effectiveness of monetary policy in Türkiye, a nation with a long history of high and sustained dollarization. Türkiye has seen considerable levels of dollarization for almost 40 years. The study uses data from the third quarters of 1998 through 2022. This study investigates the intricate and nonlinear connections between dollarization, monetary policy, and other economic variables. It does so by using machine learning (ML) models. The findings show that dollarization has a modest impact on economic expansion and that there may be a favorable relationship between dollarization and financial deepening. The study also reveals how dollarization interacts with other control variables to affect inflation rates. Despite the fact that the ML technique cannot prove causation, this research offers insightful information on the intricate dynamics of dollarization and its implications for the success of monetary policy. For policymakers attempting to comprehend and manage dollarization's possible influence on economic stability in Türkiye and other nations, these findings have major significance.

Objective: to analyze current trends in the formation of alternative cross-border payment systems in the context of geopolitical fragmentation, sanctions pressure, and the formation of narratives of financial sovereignty of states. The author pays special attention to the role of Central Bank digital currencies (CBDC), digital financial assets and multilateral platforms as tools for de-dollarization and the creation of a multipolar global financial architecture.Methods: the research applies general scientific methods of cognition (analysis, synthesis, system approach, modeling), an interdisciplinary approach involving theories of international relations (neorealism, world-system analysis, institutionalism, constructivism), as well as cluster analysis of geopolitical strategies and comparative study of architectures of digital payment initiatives (including the Bank for International Settlements projects like mBridge, Dunbar, Jura).Results: the article identifies the main vectors, targets and tools for the implementation of alternative payment projects; assesses the advantages and risks of the Bank for International Settlements initiatives; and identifies four main geopolitical clusters with differing strategies for the development of digital payment systems: American-European (defensive), AsiaPacific (innovative and expansionist), Middle East (Sharia-oriented) and Latin American (inclusive). The author showed that the key barriers to the creation of universal alternative systems are regulatory inconsistency, technological incompatibility, and geopolitical opposition. Russia’s strategy is defined as “selective integration”, using points of intersection of interests between clusters to ensure financial sovereignty.Scientific novelty: for the first time, an integrative model for the analysis of alternative payment systems was proposed, combining structural, ideological, strategic and domestic policy levels. The author introduced an original typology of geopolitical clusters of digital payments and substantiated the concept of “selective integration” as Russia’s strategy in a multipolar financial order.Practical significance: the research results can be used in the development of national and international policies in the field of digital finance, in the formation of strategies for the creation of interstate payment platforms (within BRICS, SCO, and EAEU), as well as in the design of legal and technological solutions to ensure financial stability and sovereignty under the sanctions pressure.