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Financial dollarization: Short-run determinants in transition economies

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

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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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
Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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