Economics at your fingertips  

Carry Trade vs. Deposit-Driven Euroization

Nan Geng, Tiberiu Scutaru and Johannes Wiegand ()

No 2018/058, IMF Working Papers from International Monetary Fund

Abstract: Financial “euroization”—or “dollarization” outside of Central and Eastern Europe—is typically analyzed as a singular phenomenon that can be traced to a common set of factors. This paper argues that two types of euroization need to be distinguished, which have different causes, economic consequences, and policy implications: carry trade euroization that emerges when households and corporations seek to exploit interest rate differentials between foreign currency loans and local currency deposits, and deposit-driven euroization that is rooted in distrust in the local currency as a savings vehicle. We present a theoretical framework that sketches key features of both euroization types, and test it with data from 28 Emerging European and Central Asian economies.

Keywords: WP; interest rate; FX loan; Financial Dollarization; Euroization; Emerging Europe; carry trade euroization; FX position; repayment scheme; FX borrowing; loan origination; Loans; Currencies; Currency mismatches; Financial statements; Central and Eastern Europe; Central Asia; Europe; Global (search for similar items in EconPapers)
Pages: 29
Date: 2018-03-15
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link) (application/pdf)

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:

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().

Page updated 2023-12-04
Handle: RePEc:imf:imfwpa:2018/058