The Determinants of Financial Euroization in a Post-Transition Country: Do Threshold Effects Matter?
This paper investigates the long-run and short-run determinants of financial euroization (FE) using both linear and threshold models. We model deposit euroization (DE) and credit euroization (CE) in Croatia, a post-transition country recording very high and persistent unofficial FE. The results suggest that only the portfolio view is important for explaining DE and CE. The market failure view does not seem to matter for FE in Croatia. Both nominal and real exchange rate changes have a strong effect on FE in the long run; the former is more important for DE and the latter for CE. In the short and long run CE is also determined by matching behavior of banks’ foreign currency positions. Both DE and CE respond to changes in inflation and exchange rate volatility. Threshold cointegration confirms that FE determination is subject to significant threshold effects, while error correction models suggest that FE adjustment is very slow and asymmetric, partly due to very strong FE persistence.
Volume (Year): 61 (2011)
Issue (Month): 3 (July)
|Contact details of provider:|| Postal: |
Phone: +420 2 222112330
Fax: +420 2 22112304
Web page: http://ies.fsv.cuni.cz/
More information through EDIRC
References listed on IDEAS
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.:
- Eduardo Levy-Yeyati, 2004.
"FINANCIAL DOLLARIZATION: Evaluating the consequences,"
Econometric Society 2004 Latin American Meetings
184, Econometric Society.
- Eduardo Levy Yeyati, 2006. "Financial dollarization: evaluating the consequences," Economic Policy, CEPR;CES;MSH, vol. 21(45), pages 61-118, 01.
- Eduardo Levy Yeyati, 2005. "Financial Dollarisation: Evaluating The Consequences," Business School Working Papers findollarisation, Universidad Torcuato Di Tella.
- Miguel A. Savastano, 1996. "Dollarization in Latin America; Recent Evidence and Some Policy Issues," IMF Working Papers 96/4, International Monetary Fund.
- Brown, M. & Kirschenmann, K. & Ongena, S., 2009.
"Foreign Currency Loans - Demand or Supply Driven?,"
2009-78, Tilburg University, Center for Economic Research.
- Martin Brown & Karolin Kirschenmann & Steven Ongena, 2011. "Foreign Currency Loans - Demand or Supply Driven?," Working Papers 2011-02, Swiss National Bank.
- Brown, Martin & Kirschenmann, Karolin & Ongena, Steven, 2010. "Foreign Currency Loans - Demand or Supply Driven?," Proceedings of the German Development Economics Conference, Hannover 2010 8, Verein für Socialpolitik, Research Committee Development Economics.
- Brown, Martin & Kirschenmann, Karolin & Ongena, Steven, 2010. "Foreign Currency Loans - Demand or Supply Driven?," CEPR Discussion Papers 7952, C.E.P.R. Discussion Papers.
- Bruce E. Hansen & Mehmet Caner, 1997.
"Threshold Autoregressions with a Unit Root,"
Boston College Working Papers in Economics
381, Boston College Department of Economics.
- Robert Rennhack & Masahiro Nozaki, 2006. "Financial Dollarization in Latin America," IMF Working Papers 06/7, International Monetary Fund.
- Sebastian Galiani & Eduardo Levy Yeyati & Ernesto Schargrodsky, 2003.
"Financial Dollarization and Debt Deflation under a Currency Board,"
64, Universidad de San Andres, Departamento de Economia, revised Nov 2003.
- Galiani, Sebastian & Levy Yeyati, Eduardo & Schargrodsky, Ernesto, 2003. "Financial dollarization and debt deflation under a currency board," Emerging Markets Review, Elsevier, vol. 4(4), pages 340-367, December.
- Eduardo Levy Yeyati & Ernesto Schargrodsky & Sebastián Galiani, 2003. "Finantial Dollarization and Debt Deflation under a Currency Board," Business School Working Papers tres, Universidad Torcuato Di Tella.
- Martin Brown & Steven Ongena & Pinar Yesin, 2009.
"Foreign Currency Borrowing by Small Firms,"
2009-02, Swiss National Bank.
- Ize, Alain & Yeyati, Eduardo Levy, 2003. "Financial dollarization," Journal of International Economics, Elsevier, vol. 59(2), pages 323-347, March.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Basso, Henrique S. & Calvo-Gonzalez, Oscar & Jurgilas, Marius, 2007. "Financial dollarization: the role of banks and interest rates," Working Paper Series 0748, European Central Bank.
- Anastasia Guscina, 2008. "Impact of Macroeconomic, Political, and Institutional Factorson the Structure of Government Debt in Emerging Market Countries," IMF Working Papers 08/205, International Monetary Fund.
- Helmut Stix, 2008. "Euroization: What Factors drive its Persistence?," Working Papers 140, Oesterreichische Nationalbank (Austrian Central Bank).
- Cook, David, 2004. "Monetary policy in emerging markets: Can liability dollarization explain contractionary devaluations?," Journal of Monetary Economics, Elsevier, vol. 51(6), pages 1155-1181, September.
- Eduardo Levy Yeyati, 2003. "Financial Dedollarization: A Carrot and Stick Approach," Business School Working Papers nueve, Universidad Torcuato Di Tella.
When requesting a correction, please mention this item's handle: RePEc:fau:fauart:v:61:y:2011:i:3:p:230-251. See general 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: (Lenka Herrmannova)
If references are entirely missing, you can add them using this form.