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Deposit dollarization in emerging markets: modelling the hysteresis effect

Anna Krupkina () and Alexey Ponomarenko
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Anna Krupkina: Bank of Russia

Journal of Economics and Finance, 2017, vol. 41, issue 4, 794-805

Abstract: Abstract We estimate a nonlinear relationship that determines two equilibrium levels of deposit dollarization depending on the current value of dollarization and previous episodes of sharp depreciation of the national currency over the past five years. If exchange rate is stable, convergence to a higher equilibrium level of dollarization begins when the 45–50 % threshold of deposit dollarization is exceeded. We estimate the model for short-run dynamics of dollarization and find that the speed of convergence to the higher equilibrium implies quarterly increases of 1.2 to 3 percentage points in the ratio of foreign currency deposits to total deposits.

Keywords: Dollarization; Hysteresis; Emerging markets (search for similar items in EconPapers)
JEL-codes: E41 F31 (search for similar items in EconPapers)
Date: 2017
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Working Paper: Deposit dollarization in emerging markets: modelling the hysteresis effect (2015) Downloads
Working Paper: Deposit dollarization in emerging markets: modelling the hysteresis effect (2015) Downloads
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