Dollarization of deposits in the short and long run: Evidence from CESE countries
In this paper, we study the drivers of permanent and transitory deposit dollarization for a sample of CESE countries using panel cointegration techniques. The results suggest that a positive cointegration relationship exists between permanent dollarization and Minimum Variance Portfolio (MV...
Main Authors: | , |
---|---|
Format: | Article |
Language: | English |
Published: |
Economists' Association of Vojvodina
2017-01-01
|
Series: | Panoeconomicus |
Subjects: | |
Online Access: | http://www.doiserbia.nb.rs/img/doi/1452-595X/2017/1452-595X1600017U.pdf |
Summary: | In this paper, we study the drivers of permanent and transitory deposit
dollarization for a sample of CESE countries using panel cointegration
techniques. The results suggest that a positive cointegration relationship
exists between permanent dollarization and Minimum Variance Portfolio (MVP)
share. This provides an additional empirical validation of the MVP method as
the standard tool for analyzing financial dollarization. In the long run,
agents make savings decisions based on the relative volatilities of
inflation and nominal depreciation rates and do not take into account the
interest rate spread. Somewhat different factors affect dollarization in the
short rather than in the long run. Namely, apart from MVP share, transitory
deposit dollarization is driven, also, by the real interest rate spread. Our
results suggest that affecting dollarization through changes in the interest
rate spread may have a short term impact. In the long run, however, for
dedollarization it is critical to reduce the volatility of inflation
compared to the volatility of exchange rate depreciation. [Project of the Serbian Ministry of Education, Science and Technological Development, Grant no. 179005] |
---|---|
ISSN: | 1452-595X 2217-2386 |