Extending the Determinants of Dollarization in Sub-Saharan Africa: The Role of Easy Access to Foreign Exchange Earnings

Ibrahim Raheem and Simplice Asongu

No 16/033, Research Africa Network Working Papers from Research Africa Network (RAN)

Abstract: This study argues that the ease at which economic agents have access to foreign earnings would influence/increase the level of dollarization in the economy. The three sources of foreign currency earnings are financial integration, trade openness and natural resource rent. As such, we extend the determinants of dollarization to capture these variables. A dataset of 26 countries in sub-Saharan Africa (SSA) for the period 2001 – 2012 was built. Based on Tobit regression, we found that all the proxies of foreign currency earning, with the exception of natural resource rent, are significant contributors to the increasing rate of dollarization. Specifically, it was found that trade openness and financial liberalization are positive determinants of dollarization, while natural resource rent serves as drag to the dollarization process. These results remain valid to three robustness tests. Policy implications and suggestions for future research were proposed.

Keywords: Dollarization; Openness; Resources; Tobit regression; SSA (search for similar items in EconPapers)
JEL-codes: C21 E31 E41 (search for similar items in EconPapers)
Pages: 34
Date: 2016-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published: Research in International Business and Finance, 45, October 2018, Pages 106-120

Downloads: (external link)
http://publications.resanet.org/RePEc/abh/abh-wpap ... b-Saharan-Africa.pdf Revised version, 2016 (application/pdf)

Related works:
Journal Article: Extending the determinants of dollarization in sub-Saharan Africa: The role of easy access to foreign exchange earnings (2018)
Working Paper: Extending the Determinants of Dollarization in Sub-Saharan Africa: The Role of Easy Access to Foreign Exchange Earnings (2016)
Working Paper: Extending the Determinants of Dollarization in Sub-Saharan Africa: The Role of Easy Access to Foreign Exchange Earnings (2016)
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