Friday, February 17, 2017

Small state dilemma resolved by state account indexation to imperial dollar

"A feedback between the health of the financial sector and the exchange rate amplifies the effects of the crisis. The pres- ence of dollarized liabilities is crucial for this mechanism. Dollarized liabilities arise endogenously when domestic investors expect a currency crisis with sufficiently high probability and switch their deposits from domestic to foreign currency denomination."

Set up state run
dollar indexed deposit system