IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/79087.html
   My bibliography  Save this paper

Foreign currency lending in Albania

Author

Listed:
  • Shijaku, Gerti

Abstract

The growth of lending in foreign currency in many Central, Eastern and South Eastern European (CESEE) countries has driven to the expansion of analyses and researches in this regard. In Albania, similar to the other regional countries, the study of main determinants of foreign currency-lending is rather important. FCL accounts for 65% of lending to private sector. This paper examines the determinants of FCL to the private sector by means of the bound test approach to Autoregressive Distributed Lag approach, based on demand and supply indicators. The results provide evidence that foreign currency lending is mainly driven by the availability of bank foreign funding deposits and minimum variance portfolio share. Foreign currency lending is more preferred under higher interest rate differentials, inflation volatility and lower exchange rate volatility. The study identifies a long-run cointegrated and stable relationship.

Suggested Citation

  • Shijaku, Gerti, 2016. "Foreign currency lending in Albania," MPRA Paper 79087, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:79087
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/79087/1/MPRA_paper_79087.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Shijaku, Gerti, 2016. "The role of money as an important pillar for monetary policy: the case of Albania," MPRA Paper 79088, University Library of Munich, Germany.
    2. Christian Weller, 2000. "Financial Liberalization, Multinational Banks and Credit Supply: The case of Poland," International Review of Applied Economics, Taylor & Francis Journals, vol. 14(2), pages 193-211.
    3. Brown, M. & de Haas, R., 2010. "Foreign Currency Lending in Emerging Europe : Bank Level Evidence," Other publications TiSEM 29059e97-755d-4c51-b372-e, Tilburg University, School of Economics and Management.
    4. Shijaku, Gerti & Kalluci, Irini, 2013. "Determinants of bank credit to the private sector: The case of Albania," MPRA Paper 79092, University Library of Munich, Germany.
    5. Elisabeth Beckmann & Thomas Scheiber & Helmut Stix, 2011. "How the Crisis Affected Foreign Currency Borrowing in CESEE: Microeconomic Evidence and Policy Implications," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 25-43,112-1.
    6. Ize, Alain & Yeyati, Eduardo Levy, 2003. "Financial dollarization," Journal of International Economics, Elsevier, vol. 59(2), pages 323-347, March.
    7. Mr. Olivier D Jeanne, 2003. "Why Do Emerging Economies Borrow in Foreign Currency?," IMF Working Papers 2003/177, International Monetary Fund.
    8. Brown, M. & Ongena, S. & Yesin, P., 2008. "Currency Denomination of Bank Loans : Evidence from Small Firms in Transition Countries," Discussion Paper 2008-16, Tilburg University, Center for Economic Research.
    9. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    10. Mr. Christoph B. Rosenberg & Marcel Tirpák, 2008. "Determinants of Foreign Currency Borrowing in the New Member States of the EU," IMF Working Papers 2008/173, International Monetary Fund.
    11. Ms. Mercedes Garcia-Escribano & Mr. Sebastian Sosa, 2011. "What is Driving Financial De-Dollarization in Latin America?," IMF Working Papers 2011/010, International Monetary Fund.
    12. Brzoza-Brzezina, Michał & Chmielewski, Tomasz & Niedźwiedzińska, Joanna, 2007. "Substitution between domestic and foreign currency loans in Central Europe. Do central banks matter?," MPRA Paper 6759, University Library of Munich, Germany.
    13. Brown, M. & Kirschenmann, K. & Ongena, S., 2009. "Foreign Currency Loans - Demand or Supply Driven?," Other publications TiSEM 75ee4df5-492e-4e1f-8dc4-3, Tilburg University, School of Economics and Management.
    14. Neanidis, Kyriakos C. & Savva, Christos S., 2009. "Financial dollarization: Short-run determinants in transition economies," Journal of Banking & Finance, Elsevier, vol. 33(10), pages 1860-1873, October.
    15. Calvo-Gonzalez, Oscar & Basso, Henrique S. & Jurgilas, Marius, 2007. "Financial dollarization: the role of banks and interest rates," Working Paper Series 748, European Central Bank.
    16. M. Emranul Haque & Kyriakos C. Neanidis, 2009. "Financial Dollarization: Short-Run Determinants in Transition Economies," Centre for Growth and Business Cycle Research Discussion Paper Series 114, Economics, The University of Manchester.
    17. 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.
    18. Shijaku, Gerti, 2012. "Optimal level of reserve holding: an empirical investigation in the case of Albania," MPRA Paper 79091, University Library of Munich, Germany.
    19. Katharina Steiner, 2011. "Households’ Exposure to Foreign Currency Loans in CESEE EU Member States and Croatia," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 6-24.
    20. Claudiu Tiberiu Albulescu, 2010. "Forecasting Credit Growth Rate In Romania: From Credit Boom To Credit Crunch?," Romanian Economic Business Review, Romanian-American University, vol. 5(1), pages 62-75, March.
    21. 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.
    22. Matti Keloharju & Mervi Niskanen, 2001. "Why Do Firms Raise Foreign Currency Denominated Debt? Evidence from Finland," European Financial Management, European Financial Management Association, vol. 7(4), pages 481-496, December.
    23. Jan Kakes, 2000. "Monetary Transmission in Europe," Books, Edward Elgar Publishing, number 1947.
    24. Basso, Henrique S. & Calvo-Gonzalez, Oscar & Jurgilas, Marius, 2011. "Financial dollarization: The role of foreign-owned banks and interest rates," Journal of Banking & Finance, Elsevier, vol. 35(4), pages 794-806, April.
    25. Calza, Alessandro & Sousa, João & Manrique, Marta, 2003. "Aggregate loans to the euro area private sector," Working Paper Series 202, European Central Bank.
    26. Mohsen Bahmani-Oskooee & Hafez Rehman, 2005. "Stability of the money demand function in Asian developing countries," Applied Economics, Taylor & Francis Journals, vol. 37(7), pages 773-792.
    27. Attila Csajbók & András Hudecz & Bálint Tamási, 2010. "Foreign currency borrowing of households in new EU member states," MNB Occasional Papers 2010/87, Magyar Nemzeti Bank (Central Bank of Hungary).
    28. Luca, Alina & Petrova, Iva, 2008. "What drives credit dollarization in transition economies?," Journal of Banking & Finance, Elsevier, vol. 32(5), pages 858-869, May.
    29. repec:onb:oenbwp:y::i:171:b:1 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gerti Shijaku, 2015. "The Macroeconomic Pass-through Effects of Monetary Policy through Sign Restrictions Approach: In the Case of Albania," IHEID Working Papers 11-2015, Economics Section, The Graduate Institute of International Studies.
    2. Olta Manjani, 2015. "Estimating the Determinants of Financial Euroization in Albania," IHEID Working Papers 07-2015, Economics Section, The Graduate Institute of International Studies.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Elisabeth Beckmann & Sandra Dvorsky & Thomas Scheiber, 2011. "OeNB Euro Survey: Growing Uncertainty, but Overall Euroization Not Affected," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 4, pages 88-99.
    3. 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.
    4. 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.
    5. Judit Temesvary, 2016. "The drivers of foreign currency-based banking in Central and Eastern Europe," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 24(2), pages 233-257, April.
    6. 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.
    7. Hudecz, András, 2012. "Párhuzamos történetek. A lakossági devizahitelezés kialakulása és kezelése Lengyelországban, Romániában és Magyarországon [Parallel stories. The development and treatment of household foreign-curre," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 349-411.
    8. Beckmann, Elisabeth & Stix, Helmut, 2015. "Foreign currency borrowing and knowledge about exchange rate risk," Journal of Economic Behavior & Organization, Elsevier, vol. 112(C), pages 1-16.
    9. Marina Tkalec, 2013. "The Dynamics of Deposit Euroization in European Post-Transition Countries: Evidence from Threshold VAR," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 66-83.
    10. repec:onb:oenbwp:y::i:171:b:1 is not listed on IDEAS
    11. Marcelin, Isaac & Mathur, Ike, 2016. "Financial sector development and dollarization in emerging economies," International Review of Financial Analysis, Elsevier, vol. 46(C), pages 20-32.
    12. Elisabeth Beckmann, 2017. "How does foreign currency debt relief affect households’ loan demand? Evidence from the OeNB Euro Survey in CESEE," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 8-32.
    13. Elisabeth Beckmann & Anita Roitner & Helmut Stix, 2015. "A Local or a Foreign Currency Loan? Evidence on the Role of Loan Characteristics, Preferences of Households and the Effect of Foreign Banks," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 24-48.
    14. Ongena, Steven & Brown, Martin & Yeşin, Pınar, 2009. "Foreign Currency Borrowing by Small Firms," CEPR Discussion Papers 7540, C.E.P.R. Discussion Papers.
    15. Brown, Martin & De Haas, Ralph & Sokolov, Vladimir, 2013. "Regional Inflation and Financial Dollarization," Working Papers on Finance 1327, University of St. Gallen, School of Finance.
    16. Júlia Király, 2020. "Hungary and Other Emerging EU Countries in the Financial Storm," Financial and Monetary Policy Studies, Springer, number 978-3-030-49544-2, June.
    17. Olta Manjani, 2015. "Estimating the Determinants of Financial Euroization in Albania," IHEID Working Papers 07-2015, Economics Section, The Graduate Institute of International Studies.
    18. Mr. Christoph B. Rosenberg & Marcel Tirpák, 2008. "Determinants of Foreign Currency Borrowing in the New Member States of the EU," IMF Working Papers 2008/173, International Monetary Fund.
    19. Kyriakos C. Neanidis, 2010. "Financial Dollarization and European Union Membership," International Finance, Wiley Blackwell, vol. 13(2), pages 257-282, August.
    20. Andrii Kaminskyi & Nataliia Versal, 2018. "Risk Management of Dollarization in Banking: Case of Post-Soviet Countries," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 14(2), pages 21-40.
    21. Capasso, Salvatore & Neanidis, Kyriakos C., 2019. "Domestic or foreign currency? Remittances and the composition of deposits and loans," Journal of Economic Behavior & Organization, Elsevier, vol. 160(C), pages 168-183.

    More about this item

    Keywords

    Foreign currency lending; dollarization; minimum variance portfolio; ARDL approach;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:79087. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.