Measuring the speed of currency substitution

Itai Agur

Applied Economics Letters, 2023, vol. 30, issue 10, 1385-1389

Abstract: Financial dollarization is a prevalent and persistent phenomenon among emerging and developing economies. This paper uses data on deposit dollarization in 173 countries between 1975 and 2018 to present stylized facts on the speed of currency substitution, which has not previously been systematically measured. In doing so, the paper casts a wide net in defining what constitutes a currency substitution episode. Overall, when currency substitution happens, it happens fast: the share of total deposits that is denominated in foreign currency rises by 6.5 percentage points per year during an average episode.

Date: 2023
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DOI: 10.1080/13504851.2022.2056122

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