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Do the Drivers of Loan Dollarization Differ between CESEE and Latin America? A Meta-Analysis

Mariya Hake (), Fernando Lopez-Vicente () and Luis Molina Sánchez ()
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Mariya Hake: Oesterreichische Nationalbank, Foreign Research Division

Authors registered in the RePEc Author Service: Fernando Salvador López Vicente ()

Focus on European Economic Integration, 2014, issue 1, 8-35

Abstract: In this paper we compare the determinants of loan dollarization in two emerging market regions, namely Central, Eastern and Southeastern Europe (CESEE) and Latin America, through a meta-analysis of 32 studies that provide around 1,200 estimated coefficients for six drivers of foreign currency lending. As a common pattern, we find macroeconomic instability (as expressed by inflation volatility) and banks’ funding in foreign currency to play a significant role in explaining loan dollarization in both regions. In contrast, the interest rate differential appears to be a key determinant only in Latin America, while the positive impact of exchange rate volatility on dollarization implies a more prominent role for supply factors in the CESEE region. While the robustness of the results has been verified, our meta-analysis shows that estimates reported in the literature tend to be influenced by study characteristics such as the methodology applied and the data used.

Keywords: foreign currency loans; CESEE; Latin America; metaregression; random effects maximum likelihood (search for similar items in EconPapers)
JEL-codes: C5 E52 F31 O57 P20 (search for similar items in EconPapers)
Date: 2014
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Working Paper: Do the drivers of loan dollarisation differ between cesee and Latin America? a meta-analysis (2014) Downloads
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