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A Qualitative Exploration Of Euroization And Its Risks At Bank Level

Author

Listed:
  • Albulena Xhelili

    (University of Prishtina, Republic of Kosovo)

  • Iraj Hashi

    (Staffordshire University, United Kingdom)

  • Valentin Toci

    (University of Prishtina, Republic of Kosovo)

Abstract

Euroization, which is widely considered a defining characteristic of the banking system in transition economies, has been ignored in the qualitative research literature. This paper aims at exploring euroization and its related risks at bank level through a qualitative analysis in two South East European countries. The research was conducted through semi-structured interviews with risk managers of banks in order to gain a better understanding of this phenomenon from a bank’s perspective. The main finding is that macroprudential policy, widely considered a useful response to global financial crisis, is an important determinant of euroization. In addition, the analysis revealed that banks in these countries seem to be concerned with hedging against the risks associated with euroization; however they seem to overly rely on the natural hedging associated with one group of customers, exporters. In terms of the other drivers of euroization the findings of this analysis support the conventional view that deposit euroization and the interest rate differential were the main determinants of credit euroization in these countries.

Suggested Citation

  • Albulena Xhelili & Iraj Hashi & Valentin Toci, 2016. "A Qualitative Exploration Of Euroization And Its Risks At Bank Level," Economic Thought and Practice, Department of Economics and Business, University of Dubrovnik, vol. 25(2), pages 397-420, december.
    • Handle: RePEc:avo:emipdu:v:25:y:2016:i:2:p:397-420
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    References listed on IDEAS

    as
    1. Ize, Alain & Yeyati, Eduardo Levy, 2003. "Financial dollarization," Journal of International Economics, Elsevier, vol. 59(2), pages 323-347, March.
    2. Nicolo, Gianni De & Honohan, Patrick & Ize, Alain, 2005. "Dollarization of bank deposits: Causes and consequences," Journal of Banking & Finance, Elsevier, vol. 29(7), pages 1697-1727, July.
    3. World Bank, 2015. "World Development Indicators 2015," World Bank Publications - Books, The World Bank Group, number 21634, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Euroization; Banking; Transition Economies; Macroprudential Policy; Qualitative research;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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