IDEAS home Printed from https://ideas.repec.org/a/onb/oenbfi/y2014i1b1.html
   My bibliography  Save this article

Do the Drivers of Loan Dollarization Differ between CESEE and Latin America? A Meta-Analysis

Author

Listed:
  • Mariya Hake

    () (Oesterreichische Nationalbank, Foreign Research Division)

  • Fernando Lopez-Vicente

    ()

  • Luis Molina

    () (Banco de España)

Abstract

In this paper we compare the determinants of loan dollarization in two emerging market regions, namely Central, Eastern and Southeastern Europe (CESEE) and Latin America, through a meta-analysis of 32 studies that provide around 1,200 estimated coefficients for six drivers of foreign currency lending. As a common pattern, we find macroeconomic instability (as expressed by inflation volatility) and banks’ funding in foreign currency to play a significant role in explaining loan dollarization in both regions. In contrast, the interest rate differential appears to be a key determinant only in Latin America, while the positive impact of exchange rate volatility on dollarization implies a more prominent role for supply factors in the CESEE region. While the robustness of the results has been verified, our meta-analysis shows that estimates reported in the literature tend to be influenced by study characteristics such as the methodology applied and the data used.

Suggested Citation

  • 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.
  • Handle: RePEc:onb:oenbfi:y:2014:i:1:b:1
    as

    Download full text from publisher

    File URL: https://www.oenb.at/dam/jcr:9c1355d5-df60-496a-80fb-e145797967ac/feei_2014_q1_studies_hake.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Lane, Philip R. & Shambaugh, Jay C., 2010. "The long or short of it: Determinants of foreign currency exposure in external balance sheets," Journal of International Economics, Elsevier, vol. 80(1), pages 33-44, January.
    2. 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.
    3. Enrique Alberola & Luis Molina & Daniel Navia, 2005. "Say You Fix, Enjoy And Relax The Deleterious Effect Of Peg Announcements On Fiscal Discipline," International Finance 0509001, University Library of Munich, Germany.
    4. Iršová, Zuzana & Havránek, Tomáš, 2013. "Determinants of Horizontal Spillovers from FDI: Evidence from a Large Meta-Analysis," World Development, Elsevier, vol. 42(C), pages 1-15.
    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. Bettina Peiers & Jeffrey M. Wrase, 1997. "Dollarization hysteresis and network externalities: theory and evidence from an informal Bolivian credit market," Working Papers 97-21, Federal Reserve Bank of Philadelphia.
    7. Elisabeth Beckmann & Jarko Fidrmuc & Helmut Stix, 2012. "Foreign Currency Loans and Loan Arrears of Households in Central and Eastern Europe," Working Papers 181, Oesterreichische Nationalbank (Austrian Central Bank).
    8. Sonsoles Gallego & Sándor Gardó & Reiner Martin & Luis Molina & José María Serena, 2010. "The Impact of the Global Economic and Financial Crisis on Central Eastern and SouthEastern Europe (CESEE) and Latin America," Occasional Papers 1002, Banco de España;Occasional Papers Homepage.
    9. Kyriakos C. Neanidis, 2010. "Financial Dollarization and European Union Membership," International Finance, Wiley Blackwell, vol. 13(2), pages 257-282, August.
    10. Honig, Adam, 2009. "Dollarization, exchange rate regimes and government quality," Journal of International Money and Finance, Elsevier, vol. 28(2), pages 198-214, March.
    11. Brown, Martin & Ongena, Steven & Yesin, Pinar, 2009. "Foreign Currency Borrowing by Small Firms," CEPR Discussion Papers 7540, C.E.P.R. Discussion Papers.
    12. Alan B. Krueger, 2003. "Economic Considerations and Class Size," Economic Journal, Royal Economic Society, vol. 113(485), pages 34-63, February.
    13. 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).
    14. Peter R Haiss & Wolfgang Rainer, 2012. "Credit Euroization in Eastern Europe: The ‘Foreign Funds’ Channel at Work," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 54(3), pages 471-505, September.
    15. 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.
    16. Melvin, Michael & Ladman, Jerry, 1991. "Coca Dollars and the Dollarization of South America," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(4), pages 752-763, November.
    17. 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.
    18. Adolfo Barajas & Armando Méndez Morales, 2003. "Dollarization of Liabilities; Beyond the Usual Suspects," IMF Working Papers 03/11, International Monetary Fund.
    19. Luca, Alina & Petrova, Iva, 2008. "What drives credit dollarization in transition economies?," Journal of Banking & Finance, Elsevier, vol. 32(5), pages 858-869, May.
    20. Brindusa Anghel & Sara de la Rica & Aitor Lacuesta, 2013. "Employment polarisation in Spain over the course of the 1997-2012 cycle," Working Papers 1321, Banco de España;Working Papers Homepage.
    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. Aiba, Daiju & Odajima, Ken & Khou, Vouthy, 2017. "Foreign Currency Borrowing and Risk-Hedging Behavior: Evidence from a Household Survey in Cambodia," Working Papers 143, JICA Research Institute.
    2. Małgorzata Skibińska, 2018. "Transmission of monetary policy and exchange rate shocks under foreign currency lending," Post-Communist Economies, Taylor & Francis Journals, vol. 30(4), pages 506-525, July.
    3. Yilmaz Akyüz, 2014. "Internationalization of Finance and Changing Vulnerabilities in Emerging and Developing Economies," UNCTAD Discussion Papers 217, United Nations Conference on Trade and Development.
    4. Windischbauer, Ulrich, 2016. "Strengthening the role of local currencies in EU candidate and potential candidate countries," Occasional Paper Series 170, European Central Bank.

    More about this item

    Keywords

    foreign currency loans; CESEE; Latin America; metaregression; random effects maximum likelihood;

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General

    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:onb:oenbfi:y:2014:i:1:b:1. 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: (Markus Eller). General contact details of provider: http://edirc.repec.org/data/oenbbat.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.