Determinants of Deposit and Credit Euroization in Eastern Europe: A Bayesian Model Averaging Evidence

Petr Vanek and Petr Korab
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Petr Vanek: Department of Finance, Faculty of Business and Economics, Mendel University in Brno

No 2018-73, MENDELU Working Papers in Business and Economics from Mendel University in Brno, Faculty of Business and Economics

Abstract: The paper investigates the motives of deposit and credit euroisation in Eastern Europe employing Bayesian empirical methodology. We analyse a unique dataset of macroeconomic fundamentals, perception surveys, and institutional quality indicators and deal with the uncertainty in the model by Bayesian model averaging. Apart from traditional fundamental factors, strong institutions are found to be an important driver of both credit and deposit euroisation. Business regulation, corruption environment, administrative costs and country-specific risk impact borrowing and saving behaviour in EURO and should be reflected in designing de-euroisation policies in the region.

Keywords: Euroization; Bayesian model averaging; currency substitution; foreign currency borrowing; institutional quality (search for similar items in EconPapers)
JEL-codes: E51 F02 P24 (search for similar items in EconPapers)
Pages: 17
Date: 2018-02
New Economics Papers: this item is included in nep-eec, nep-mac and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:men:wpaper:73_2018

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