Financial Dollarization : The Role of Foreign-Owned Banks and Interest Rates
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.
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| Main Authors: | , , |
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| Format: | Journal Article biblioteca |
| Language: | EN |
| Published: |
2011
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| Subjects: | Monetary Systems, Standards, Regimes, Government and the Monetary System, Payment Systems E420, Interest Rates: Determination, Term Structure, and Effects E430, Multinational Firms, International Business F230, Banks, Other Depository Institutions, Micro Finance Institutions, Mortgages G210, |
| Online Access: | http://hdl.handle.net/10986/5181 |
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