Deposit Dollarization and Its Impact on Financial Deepening in the Developing World

Eduardo Court, Emre Ozsoz and Erick W. Rengifo
Additional contact information
Eduardo Court: Pontificia Universidad Catolica Del Peru, Centrum Catolica
Erick W. Rengifo: Fordham University, Department of Economics and Center for International Policy Studies (CIPS)

Fordham Economics Discussion Paper Series from Fordham University, Department of Economics

Abstract: One of the main reasons for dollarization is the erosion of money's function as a store of value as the Currency Substitution view suggests. It has not been uncommon for countries with high inflationary processes to have high dollarization ratios and banking system that faces important challenges and risks that significantly affect their ability to provide capital to the overall economy (financial intermediation). In these economies, dollarization played a dual role: in one hand, the role of a hedging instrument protecting the value of money and, in the other hand, contributing to generate the so-called currency mismatch and default risks. This paper investigates the role of dollarization on the development of financial intermediation in developing economies. Our empirical findings suggest that dollarization has a negative impact on financial deepening, except on high-inflation economies.

Keywords: Dollarization; Financial Development; Financial Deepening (search for similar items in EconPapers)
JEL-codes: F31 G21 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-cwa, nep-ifn and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://archive.fordham.edu/ECONOMICS_RESEARCH/PAP ... rt_ozsoz_rengifo.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:frd:wpaper:dp2010-08

Access Statistics for this paper

More papers in Fordham Economics Discussion Paper Series from Fordham University, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Fordham Economics ().