IDEAS home Printed from https://ideas.repec.org/a/pal/compes/v54y2012i3p471-505.html
   My bibliography  Save this article

Credit Euroization in Eastern Europe: The ‘Foreign Funds’ Channel at Work

Author

Listed:
  • Peter R Haiss

    (1] Department of Global Business and Trade, Vienna University of Economics and Business, Vienna A-1090, Althanstraße 51, Austria.
    [2] IES Vienna – Institute for the International Education of Students, Johannesgasse 7, Vienna A-1010, Austria.[3] UniCredit Bank Austria, Department Corporates II, Schottengasse 6–8, Vienna A-1010, Austria.)

  • Wolfgang Rainer

    (1] Department of Global Business and Trade, Vienna University of Economics and Business, Vienna A-1090, Althanstraße 51, Austria.
    [2] Equity One Management GmbH, Marc-Aurel-Strasse 10/16, Vienna A-1010, Austria.)

Abstract

This paper aims to analyze the process of credit euroization in Emerging Europe and to investigate the motives of borrowers and lenders to engage in foreign currency lending. We empirically test for drivers of credit euroization in 13 European post-transition countries over the pre-crisis period 1999–2007. We find evidence that underpins the concept of the foreign funds channel, which asserts that credit euroization is driven by foreign borrowings, regardless of whether the funds are channeled into the system via subsidiaries of foreign banks (foreign bank channel) or via domestic banks borrowing abroad.

Suggested Citation

  • 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.
    • Handle: RePEc:pal:compes:v:54:y:2012:i:3:p:471-505
    as

    Download full text from publisher

    File URL: http://www.palgrave-journals.com/ces/journal/v54/n3/pdf/ces201227a.pdf
    File Function: Link to full text PDF
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: http://www.palgrave-journals.com/ces/journal/v54/n3/full/ces201227a.html
    File Function: Link to full text HTML
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. repec:onb:oenbwp:y:2006:i:11:b:1 is not listed on IDEAS
    2. Marco Arena & Carmen Reinhart & Francisco Vázquez, 2006. "The Lending Channel in Emerging Economics: Are Foreign Banks Different?," NBER Working Papers 12340, National Bureau of Economic Research, Inc.
    3. repec:onb:oenbwp:y:2006:i:2:b:1 is not listed on IDEAS
    4. Peter Backé & Doris Ritzberger-Grünwald & Helmut Stix, 2007. "The Euro on the Road East: Cash, Savings and Loans," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 114-127.
    5. Peter Backé & Thomas Reininger, 2006. "Main Features of Recent Banking Sector Developments in Selected Southeastern European Countries," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 11, pages 66-82.
    6. Peter Backé, 2006. "Bank Intermediation in Southeastern Europe: Depth and Structure," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 48-68.
    7. Bank for International Settlements, 2005. "Foreign direct investment in the financial sector - experiences in Asia, central and eastern Europe and Latin America," CGFS Papers, Bank for International Settlements, number 25.
    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. 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. Nilgun Caglarirmak Uslu & Sevcan Kapkara, 2019. "The Determinants of Credit Dolarization: Turkish Case," Economics Literature, WERI-World Economic Research Institute, vol. 1(2), pages 148-167, December.
    3. M. Frömmel & M. Luetje, 2014. "Are exporting firms always a good hedge against currency risk? Evidence from Central and Eastern European Countries," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 14/873, Ghent University, Faculty of Economics and Business Administration.
    4. Škrabić Perić, Blanka & Rimac Smiljanić, Ana & Aljinović, Zdravka, 2018. "Credit risk of subsidiaries of foreign banks in CEE countries: Impacts of the parent bank and home country economic environment," The North American Journal of Economics and Finance, Elsevier, vol. 46(C), pages 49-69.
    5. Laura Cojocaru & Evangelos M. Falaris & Saul D. Hoffman & Jeffrey B. Miller, 2016. "Financial System Development and Economic Growth in Transition Economies: New Empirical Evidence from the CEE and CIS Countries," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(1), pages 223-236, January.
    6. Bitar, Joseph, 2021. "Foreign Currency Intermediation: Systemic Risk and Macroprudential Regulation," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 2(2).

    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. Alberto Franco Pozzolo, 2009. "Bank Cross-Border Mergers and Acquisitions: Causes, Consequences, and Recent Trends," Springer Books, in: Alberto Zazzaro & Michele Fratianni & Pietro Alessandrini (ed.), The Changing Geography of Banking and Finance, edition 1, chapter 0, pages 155-183, Springer.
    2. Linda S Goldberg, 2009. "Understanding Banking Sector Globalization," IMF Staff Papers, Palgrave Macmillan, vol. 56(1), pages 171-197, April.
    3. Michael Pomerleano, 2011. "Developing Regional Financial Markets – the Case of East Asia," Chapters, in: Ulrich Volz (ed.), Regional Integration, Economic Development and Global Governance, chapter 9, Edward Elgar Publishing.
    4. Kouretas, Georgios P. & Pawłowska, Małgorzata, 2020. "Does change in the market structure have any impact on different types of bank loans in the EU?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 65(C).
    5. Wu, Ji & Luca, Alina C. & Jeon, Bang Nam, 2011. "Foreign bank penetration and the lending channel in emerging economies: Evidence from bank-level panel data," Journal of International Money and Finance, Elsevier, vol. 30(6), pages 1128-1156, October.
    6. Meriem Haouat & Diego N. Moccero & Ramiro Sosa Navarro, 2012. "Foreign Banks and Credit Volatility: The Case of Latin American Countries," Review of International Economics, Wiley Blackwell, vol. 20(5), pages 1017-1033, November.
    7. Varlik Serdar & Berument M. Hakan, 2016. "Credit channel and capital flows: a macroprudential policy tool? Evidence from Turkey," The B.E. Journal of Macroeconomics, De Gruyter, vol. 16(1), pages 145-170, January.
    8. Beatriz de Blas & Katheryn Russ, 2010. "FDI in the Banking Sector," Working Papers 108, University of California, Davis, Department of Economics.
    9. Bank for International Settlements & Federal Reserve Bank of Atlanta, 2008. "New financing trends in Latin America: a bumpy road towards stability," BIS Papers, Bank for International Settlements, number 36.
    10. Philipp Schnabl, 2012. "The International Transmission of Bank Liquidity Shocks: Evidence from an Emerging Market," Journal of Finance, American Finance Association, vol. 67(3), pages 897-932, June.
    11. Fungáčová Z. & Solanko L., 2009. "Risk-taking by Russian banks: do location, ownership and size matter?," Higher School of Economics Economic Journal Экономический журнал Высшей школы экономики, CyberLeninka;Федеральное государственное автономное образовательное учреждение высшего образования «Национальный исследовательский университет «Высшая школа экономики», vol. 13(1), pages 101-129.
    12. Sophie Brana & Delphine Lahet, 2011. "Foreign Banks and the Stability of Foreign and Domestic Credit in CEECs," Larefi Working Papers 201107, Larefi, Université Bordeaux 4.
    13. Linda S. Goldberg, 2007. "Financial sector FDI and host countries: new and old lessons," Economic Policy Review, Federal Reserve Bank of New York, vol. 13(Mar), pages 1-17.
    14. Mr. Rupert D Worrell & Andrea M. Maechler & Ms. Srobona Mitra, 2007. "Decomposing Financial Risks and Vulnerabilities in Eastern Europe," IMF Working Papers 2007/248, International Monetary Fund.
    15. Javier Rodríguez & Javier Santiso, 2007. "Banking on Democracy: The Political Economy of International Private Bank Lending in Emerging Markets," OECD Development Centre Working Papers 259, OECD Publishing.
    16. International Monetary Fund, 2011. "Impact of the Global Crisison Banking Sector Soundness in Asian Low-Income Countries," IMF Working Papers 2011/115, International Monetary Fund.
    17. Uluc Aysun & Ryan Brady & Adam Honig, 2011. "Financial Frictions and the Credit Channel of Monetary Transmission," Working Papers 2011-03, University of Central Florida, Department of Economics.
    18. Konstantins Benkovskis, 2008. "Is there a Bank Lending Channel of Monetary Policy in Latvia? Evidence from Bank Level Data," Working Papers 2008/01, Latvijas Banka.
    19. Ramiro Sosa Navarro, 2010. "Fiscal Imbalances, Inflation and Sovereign Default Dynamics," Ensayos de Política Económica, Departamento de Investigación Francisco Valsecchi, Facultad de Ciencias Económicas, Pontificia Universidad Católica Argentina., vol. 1(4), pages 108-142, Octubre.
    20. repec:dau:papers:123456789/4726 is not listed on IDEAS
    21. Fungáčová, Zuzana & Herrala, Risto & Weill, Laurent, 2013. "The influence of bank ownership on credit supply: Evidence from the recent financial crisis," Emerging Markets Review, Elsevier, vol. 15(C), pages 136-147.

    More about this item

    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:pal:compes:v:54:y:2012:i:3:p:471-505. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    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.