Coca Dollars and the Dollarization of South America

Abstract

A unique data set on the informal loan market in a coca-growing region of Bolivia is used to explore the hypothesis that the dollarization of this market is related to the coca industry. Implications are then drawn for other nations where coca or cocaine is an important industry. The authors find that loans are significantly more likely to be denominated in dollars in the season of the major coca harvest than at any other time of the year. The effects of the term and size of loans is consistent with the financial needs of the drug industry, which is highly dollarized. Copyright 1991 by Ohio State University Press.

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