Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
9554060 | Journal of Banking & Finance | 2005 | 31 Pages |
Abstract
This paper assesses the benefits and risks associated with dollarization of bank deposits. We provide novel empirical evidence on the determinants of deposit dollarization, its role in promoting financial development, and on whether dollarization is associated with financial instability. We find that: (a) the credibility of macroeconomic policy and the quality of institutions are both key determinants of cross-country variations in dollarization; (b) dollarization is likely to promote financial deepening only in a high inflation environment; and (c) financial instability is likely higher in dollarized economies. The implications of these findings for financial sector and monetary policies are briefly discussed.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Gianni De Nicoló, Patrick Honohan, Alain Ize,