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Euroization: what factors drive its persistence? Household data evidence for Croatia, Slovenia and Slovakia

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  • Helmut Stix

Abstract

The question asked in this article is why people continue to use foreign currencies even after their economies have stabilized. Survey data for Croatia, Slovenia and Slovakia are employed to provide an answer. The results confirm the role of network effects and of remittances. Furthermore, the extent of currency substitution is found to be positively associated with the level of income and education. An important aspect of euroization seems to be age (older people are more likely to hold foreign currencies). In contrast, neither expectations about inflation rates, nor about exchange rates, do seem to affect the degree of euroization in a systematic and predictable way. Trust in the banking system is found to affect the choice between foreign currency cash and foreign currency deposits. Overall, the results support the view that the persistence in the use of foreign currencies is driven to a large extent by factors that are related to the past.

Suggested Citation

  • Helmut Stix, 2011. "Euroization: what factors drive its persistence? Household data evidence for Croatia, Slovenia and Slovakia," Applied Economics, Taylor & Francis Journals, vol. 43(21), pages 2689-2704.
  • Handle: RePEc:taf:applec:v:43:y:2011:i:21:p:2689-2704
    DOI: 10.1080/00036840903357413
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    References listed on IDEAS

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    1. Nienke Oomes, 2003. "Network Externalities and Dollarization Hysteresis; The Case of Russia," IMF Working Papers 03/96, International Monetary Fund.
    2. Patrick Honohan, 2007. "Dollarization and Exchange Rate Fluctuations," The Institute for International Integration Studies Discussion Paper Series iiisdp201, IIIS.
    3. Miguel A Savastano, 1996. "Dollarization in Latin America; Recent Evidence and Some Policy Issues," IMF Working Papers 96/4, International Monetary Fund.
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    Cited by:

    1. Marina Tkalec, 2013. "The Dynamics of Deposit Euroization in European Post-Transition Countries: Evidence from Threshold VAR," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 66-83.
    2. 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.
    3. Elisabeth Beckmann & Mariya Hake & Jarmila Urvová, 2013. "Determinants of Households’ Savings in Central, Eastern and Southeastern Europe," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 8-29.

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