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International Monetary Fund

,000 denizens live along the coast—vulnerable to strong winds, high seas, and landslides. The situation has become increasingly volatile with the growing frequency and severity of extreme climate events. In 2017, Category 5 Hurricane Maria ripped a catastrophic path of destruction through the island. Whole communities, government buildings, roads and bridges, and power and water services were damaged or destroyed, resulting in the loss of lives and $1.2 billion in damage in just a few hours. With growing climate threats looming, Dominica knew it had to adapt. The

Mr. Eduardo Levy Yeyati, Mr. Alain Ize, and Miguel A. Kiguel
This paper evaluates ways to protect highly dollarized banking systems from systemic liquidity runs (such as the ones that took place recently in Argentina, Uruguay, and Paraguay). In view of the limitations of available (private or official) insurance schemes, and the distortions introduced by central bank lending of last resort (LOLR), the authors favor decentralized liquid foreign asset requirements on dollar deposits, supplemented by a scheme of "circuit breakers." The latter combines the use of limited dollar liquidity to ensure the convertibility of transactional deposits with a mechanism that automatically limits the convertibility of dollar term deposits once triggered by a predetermined decline in banks' liquidity.
Mr. Eduardo Levy Yeyati, Mr. Alain Ize, and Miguel A. Kiguel

is under way. In addition to incurring potential losses through the firesale of bank assets, depositors that are left in the banks face the threat of last resort measures designed to stop the run, including deposit freezes. The rationale for running is even more compelling in a mixed-currency economy than in a peso economy or a fully dollarized economy, as threats loom of forced conversions into pesos, large exchange rate depreciations, or some combination of the two (as in the midst of the Argentine crisis of 2002). The exchange rate is typically floated to stem