Financial dollarization: The role of foreign-owned banks and interest rates

Henrique Basso, Oscar Calvo-Gonzalez and Marius Jurgilas

Journal of Banking & Finance, 2011, vol. 35, issue 4, 794-806

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.

Keywords: Financial; euroization; Foreign; banks; Interest; rate; differentials; Transition; economies (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (114)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378-4266(10)00447-4
Full text for ScienceDirect subscribers only

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:eee:jbfina:v:35:y:2011:i:4:p:794-806

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().