Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5090071 | Journal of Banking & Finance | 2011 | 13 Pages |
Abstract
Why in many economies households and firms borrow and make deposits in foreign currency? Expanding on the existing literature, our framework addresses this question allowing for interest rate differentials and access to foreign funds to play a role in explaining this process of asset substitution or financial dollarization. Using a newly compiled data set on transition economies and employing a standard panel as well as a panel-VAR methodology we find that increasing access to foreign funds leads to higher credit dollarization, while it decreases deposit dollarization. Interest rate differentials matter for the dollarization of both loans and deposits.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Henrique S. Basso, Oscar Calvo-Gonzalez, Marius Jurgilas,