Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/101601 
Year of Publication: 
1989
Series/Report no.: 
Diskussionsbeiträge - Serie II No. 77
Publisher: 
Universität Konstanz, Sonderforschungsbereich 178 - Internationalisierung der Wirtschaft, Konstanz
Abstract: 
Israelis commonly hold substantial foreign currency balances at home. This paper examines the phenomenon of these "closet dollars." We show that closet dollars are attractive only if there exists a positive probability that domestic deposits will pay negative dollar rates of return. If such negative rates of return are associated with changes in the depositor's tax bill, then low-tax consumers are most attracted to closet dollars. In addition we show that potential central bank default and transactions costs will tend to increase the volume of closet dollars.
Document Type: 
Working Paper

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