Financial dollarization: the role of banks and interest rates
AbstractThis paper develops a model to explain the determinants of financial dollarization. Expanding on the existing literature, our framework allows interest rate differentials to play a role in explaining financial dollarization. It also accounts for the increasing presence of foreign banks in the local financial sector. Using a newly compiled data set on transition economies we find that increasing access to foreign funds leads to higher credit dollarization, while it decreases deposit dollarization. Interest rate differentials matter for the dollarization of both loans and deposits. Overall, the empirical results lend support to the predictions of our theoretical model. JEL Classification:
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by European Central Bank in its series Working Paper Series with number 0748.
Date of creation: May 2007
Date of revision:
Contact details of provider:
Postal: Postfach 16 03 19, Frankfurt am Main, Germany
Phone: +49 69 1344 0
Fax: +49 69 1344 6000
Web page: http://www.ecb.europa.eu/home/html/index.en.html
More information through EDIRC
Postal: Press and Information Division, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-06-02 (All new papers)
- NEP-BAN-2007-06-02 (Banking)
- NEP-MAC-2007-06-02 (Macroeconomics)
- NEP-MON-2007-06-02 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Marco Terrones & Luis CatÃ£o, 2000. "Determinants of Dollarization - The Banking Side," IMF Working Papers 00/146, International Monetary Fund.
- Ralph de Haas & Ilko Naaborg, 2005. "Internal Capital Markets in Multinational Banks: Implications for European Transition Countries," DNB Working Papers 051, Netherlands Central Bank, Research Department.
- Jeanne, Olivier, 2003.
"Why Do Emerging Economies Borrow in Foreign Currency?,"
CEPR Discussion Papers
4030, C.E.P.R. Discussion Papers.
- Olivier Jeanne, 2003. "Why do Emerging Economies Borrow in Foreign Currency?," IMF Working Papers 03/177, International Monetary Fund.
- Adolfo Barajas & Armando MÃ©ndez Morales, 2003. "Dollarization of Liabilities: Beyond the Usual Suspects," IMF Working Papers 03/11, International Monetary Fund.
- Barth, James R. & Caprio, Gerard Jr. & Levine, Ross, 2004.
"Bank regulation and supervision: what works best?,"
Journal of Financial Intermediation,
Elsevier, vol. 13(2), pages 205-248, April.
- Barth, James R. & Caprio Jr., Gerard & Levine, Ross, 2001. "Bank regulation and supervision : what works best?," Policy Research Working Paper Series 2725, The World Bank.
- James R. Barth & Gerard Caprio, Jr. & Ross Levine, 2002. "Bank Regulation and Supervision: What Works Best?," NBER Working Papers 9323, National Bureau of Economic Research, Inc.
- Alain Ize, 2005. "Financial Dollarization Equilibria: A Framework for Policy Analysis," IMF Working Papers 05/186, International Monetary Fund.
- Ize, Alain & Yeyati, Eduardo Levy, 2003. "Financial dollarization," Journal of International Economics, Elsevier, vol. 59(2), pages 323-347, March.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Official Publications).
If references are entirely missing, you can add them using this form.