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Financial dollarization of households and firms: How does it differ by level of economic development?

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  • Juan‐Sebastian Corrales
  • Patrick Amir Imam

Abstract

Using a newly compiled and comprehensive database from International Financial Statistics, and applying panel‐regression techniques, this paper documents the evolution of households’ and firms’ dollarization over the past decade and assesses its macroeconomic determinants. Households’ and firms’ dollarization have much in common. Structural factors are more relevant than macroeconomic stability. Regarding differences, deposit dollarization, better institutions and lower inflation are relevant for households but not firms, whereas the exchange rate movements seem to play a role only for firms, particularly in higher‐income countries. In terms of loan dollarization, financial deepening is a critical driver for households only.

Suggested Citation

  • Juan‐Sebastian Corrales & Patrick Amir Imam, 2021. "Financial dollarization of households and firms: How does it differ by level of economic development?," Review of International Economics, Wiley Blackwell, vol. 29(4), pages 927-978, September.
    • Handle: RePEc:bla:reviec:v:29:y:2021:i:4:p:927-978
    DOI: 10.1111/roie.12528
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