Dedollarization

Kokenyne, Annamaria; Ley, Jeremy; Veyrune, Romain

doi:10.5089/9781455202225.001

Cited by 60 publications

(54 citation statements)

References 5 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…The domestic currency's loss of value leads to its substitution by a strong foreign currency (e.g., the US dollar). Empirically, the level of inflation is positively correlated with dollarization, as shown in Levy-Yeyati (2006), De Nicoló et al (2005, Rennhack and Nozaki (2006), Bacha et al (2007Bacha et al ( , 2009) and Kokenyne et al (2010).…”

Section: Literature Overviewmentioning

confidence: 86%

Financial dollarization and systemic risks: New empirical evidence

Vieira

Holland

Resende

2012

Journal of International Money and Finance

View full text Add to dashboard Cite

JEL classification: E50 G11 G20 Keywords:Financial dollarization Risk of inflation Risk of default a b s t r a c t This paper explores the persistence of financial dollarization in a group of 79 economies with different levels of development. Our main hypothesis is that a high level of domestic debt combined with default risk explains this persistence, even after a decline in inflation rates. Using the generalized method of moments (GMM) in a panel data analysis, our results show that inflation risks caused by increasing probability of default account for financial dollarization more than inflation rate itself. After the decrease in inflation rates, the foreign currency-denominated deposits remain large because of the high debt-to-GDP ratios, particularly in speculativegrade economies. High public indebtedness leads to expectations of default. Dollarization is a rational response to the future inflation associated with investors' expectations of default observed in highly indebted economies.

show abstract

Section: Literature Overviewmentioning

confidence: 86%

Financial dollarization and systemic risks: New empirical evidence

Vieira

Holland

Resende

2012

Journal of International Money and Finance

View full text Add to dashboard Cite

show abstract

“…Thus, in countries where the monetary authority has not established a credible reputation for pursuing price stability banks may prefer to make FX loans. As memories of bouts of (hyper)inflation are persistent, high inflation may lead to the entrenched use of FX even when economies stabilize (Kokenyne et al, 2010).…”

Section: Banks' Sensitivity To Monetary Conditionsmentioning

confidence: 99%

Foreign banks and foreign currency lending in emerging Europe

Brown

Haas

2012

Economic Policy

View full text Add to dashboard Cite

SUMMARYBased on survey data from 193 banks in 20 countries we provide the first bank-level analysis of the relationship between bank ownership, bank funding and foreign currency (FX) lending across emerging Europe. Our results contradict the widespread view that foreign banks have been driving FX lending to retail clients as a result of easier access to foreign wholesale funding. Our cross-sectional analysis shows that foreign banks do lend more in FX to corporate clients but not to households. Moreover, we find no evidence that wholesale funding had a strong causal effect on FX lending for either foreign or domestic banks. Panel estimations show that the foreign acquisition of a domestic bank does lead to faster growth in FX lending to households. However, this is driven by faster growth in household lending in general not by a shift towards FX lending.-Martin Brown and Ralph De Haas

show abstract

“…Therefore, the public has one-way expectations regarding exchange rate developments and prefers to save in foreign currency as a hedge against the expected exchange rate depreciation. This reaction to unsound macroeconomic policies is the most frequent cause of euroization (Galindo and Leiderman, 2005;Herrera and Valdés, 2005;Kokenyne, Ley, and Veyrune, 2010;and Reinhart, Rogoff, and Savastano, 2003). On the lending side, euroization derives, in this phase, from the lack of funding in domestic currency due to the public preference to save in euro.…”

Section: A Review Of the Economic Literature On Euroizationmentioning

confidence: 99%