Business Intelligence

Offshore Markets For The Domestic Currency: Monetary And Financial Stability Issues

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Executive Summary

The authors show in this paper that offshore markets intermediate a large chunk of financial transactions in major reserve currencies such as the US dollar. The authors argue that, for emerging market economies that are interested in seeing some international use of their currencies, offshore markets can help to increase the recognition and acceptance of the currency while still allowing the authorities to retain a measure of control over the pace of capital account liberalization. The development of offshore markets could pose risks to monetary and financial stability in the home economy which need to be prudently managed.

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