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Do the drivers of loan dollarisation differ between cesee and Latin America? a meta-analysis

Author

Listed:
  • Mariya Hake

    (Oesterreichische National Bank)

  • Fernando López-Vicente

    (Banco de España)

  • Luis Molina

    (Banco de España)

Abstract

In this paper we compare the determinants of loan dollarisation in two emerging market regions, namely Central, Eastern and Southeastern Europe (CESEE) and Latin America, by means of a meta-analysis of 32 studies that provide around 1,200 estimated coefficients for six drivers of foreign currency lending. One common pattern we identify is that macroeconomic instability (as expressed by inflation volatility) and banks’ funding in foreign currency play a significant role in explaining loan dollarisation in both regions. By contrast, the interest rate differential appears to be a key determinant only in Latin America, while the positive impact of exchange rate volatility on dollarisation 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 López-Vicente & Luis Molina, 2014. "Do the drivers of loan dollarisation differ between cesee and Latin America? a meta-analysis," Working Papers 1406, Banco de España.
  • Handle: RePEc:bde:wpaper:1406
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    References listed on IDEAS

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    Cited by:

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    3. 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.
    4. 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.
    5. Ana Kundid Novokmet, 2021. "Troubles with the Chf Loans in Croatia: The Story of a Case Still Waiting to Be Closed," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 14(2), pages 1-21, February.
    6. 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.
    7. Windischbauer, Ulrich, 2016. "Strengthening the role of local currencies in EU candidate and potential candidate countries," Occasional Paper Series 170, European Central Bank.

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    More about this item

    Keywords

    foreign currency loans; CESEE; Latin America; meta-regression; random effects maximum likelihood;
    All these keywords.

    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

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