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Financial dollarization: Short-run determinants in transition economies

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  • Neanidis, Kyriakos C.
  • Savva, Christos S.

Abstract

This paper examines the determinants of financial dollarization in transition economies from a short-run perspective. Using aggregate monthly data of deposit and loan dollarization we study the drivers of short-term fluctuations in dollarization and test their importance at different levels of dollarization. The results provide evidence that (a) the positive (negative) short-run effects of depreciation (monetary expansion) on deposit dollarization are exacerbated in high-dollarization countries; (b) short-run loan dollarization is mainly driven by banks matching of domestic loans and deposits, currency matching of assets and liabilities, international financial integration, and institutional quality; and (c) both types of short-run dollarization are affected by interest rate differentials and deviations from desired dollarization.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 33 (2009)
Issue (Month): 10 (October)
Pages: 1860-1873

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Handle: RePEc:eee:jbfina:v:33:y:2009:i:10:p:1860-1873

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Web page: http://www.elsevier.com/locate/jbf

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Keywords: Currency risk Financial dollarization Short-run variations Transition economies;

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References

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  1. De Nicolo, Gianni & Honohan, Patrick & Ize, Alain, 2003. "Dollarization of the banking system : good or bad?," Policy Research Working Paper Series 3116, The World Bank.
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Citations

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Cited by:
  1. Neanidis, Kyriakos C. & Savva, Christos S., 2013. "Institutions and financial dollarization: Indirect effects based on a policy experiment," Economics Letters, Elsevier, vol. 121(3), pages 405-410.
  2. Crespo Cuaresma, Jesús & Fidrmuc, Jarko & Hake, Mariya, 2014. "Demand and supply drivers of foreign currency loans in CEECs: A meta-analysis," Economic Systems, Elsevier, vol. 38(1), pages 26-42.
  3. Marina Tkalec, 2011. "The Dynamics of Deposit Euroization in European Post-transition Countries: Evidence from Threshold VAR," Working Papers 1102, The Institute of Economics, Zagreb.
  4. repec:onb:oenbwp:y:2011:i:1:b:1 is not listed on IDEAS
  5. Stephan Barisitz, 2011. "Nonperforming Loans in CESEE – What Do They Comprise?," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 4, pages 46-68.
  6. Kutan, Ali M. & Ozsoz, Emre & Rengifo, Erick W., 2012. "Cross-sectional determinants of bank performance under deposit dollarization in emerging markets," Emerging Markets Review, Elsevier, vol. 13(4), pages 478-492.
  7. Jonathan A. Batten & Peter G. Szilagyi, 2011. "The Recent Internationalization of Japanese Banks," Japanese Economy, M.E. Sharpe, Inc., vol. 38(1), pages 81-120, April.
  8. Kyriakos C. Neanidis, 2010. "Financial Dollarization and European Union Membership," Centre for Growth and Business Cycle Research Discussion Paper Series 143, Economics, The Univeristy of Manchester.
  9. Erick W. Rengifo & Emre Ozsoz & Mustapha A. Akinkunmi & Eduardo Court, 2013. "Bank Regulation in Dollarized Economies: The Case of Turkey," International Journal of Financial Studies, MDPI, Open Access Journal, vol. 1(4), pages 137-153, November.
  10. Mercedes Garcia-Escribano & Sebastian Sosa, 2011. "What is Driving Financial De-Dollarization in Latin America?," IMF Working Papers 11/10, International Monetary Fund.
  11. Fidrmuc, Jarko & Hake, Mariya & Stix, Helmut, 2013. "Households’ foreign currency borrowing in Central and Eastern Europe," Journal of Banking & Finance, Elsevier, vol. 37(6), pages 1880-1897.
  12. Mariya Hake & Fernando Lopez-Vicente & Luis Molina, 2014. "Do the Drivers of Loan Dollarization Differ between CESEE and Latin America? A Meta-Analysis," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 8-35.
  13. Baek, Seung-Gwan, 2013. "On the determinants of aggregate currency mismatch," Journal of Policy Modeling, Elsevier, vol. 35(4), pages 623-637.
  14. Airaudo, Marco, 2012. "Endogenous Dollarization, Sovereign Risk Premia and the Taylor Principle," School of Economics Working Paper Series 2012-11, LeBow College of Business, Drexel University.
  15. Jesús Crespo Cuaresma & Jarko Fidrmuc & Mariya Hake, 2011. "Determinants of Foreign Currency Loans in CESEE Countries: A Meta-Analysis," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 4, pages 69-87.
  16. repec:onb:oenbwp:y::i:171:b:1 is not listed on IDEAS

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