https://macropaperwarehouse.com/authors/francesco-ferrante/Francesco FerranteHugo -- gohugo.ioen-ushttps://macropaperwarehouse.com/papers/devaluations-deposit-dollarization-and-household-heterogeneity/https://macropaperwarehouse.com/papers/devaluations-deposit-dollarization-and-household-heterogeneity/<p><strong>Research Question</strong></p> <p>Ferrante and Gornemann study the aggregate and redistributive effects of currency devaluations in emerging market economies, focusing on a feature that prior open-economy HANK models had not jointly incorporated: households hold dollar-denominated deposits that are disproportionately concentrated among wealthier agents, and these deposits sit on the liability side of leveraged, agency-constrained banks. The paper asks how this combination of deposit dollarization and household wealth heterogeneity shapes the macroeconomic and distributional consequences of a currency depreciation, and what it implies for the optimal degree of exchange-rate smoothing by the central bank.</p>