Deposit Dollarization and the Financial Sector in Emerging Economies

Analyzing new data, the authors find that the general trend toward increased use of foreign-currency-denominated bank deposits in emerging markets has continued, despite declines in a few countries. Their analysis of the new data suggests that a si...

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Main Authors: Honohan, Patrick, Shi, Anqing
Format: Policy Research Working Paper
Language:English
en_US
Published: World Bank, Washington, DC 2014
Subjects:
Online Access:http://documents.worldbank.org/curated/en/2001/12/1671256/deposit-dollarization-financial-sector-emerging-economies
http://hdl.handle.net/10986/19409
id okr-10986-19409
recordtype oai_dc
spelling okr-10986-194092021-04-23T14:03:42Z Deposit Dollarization and the Financial Sector in Emerging Economies Honohan, Patrick Shi, Anqing BANK LENDING BANKING SYSTEM BANKNOTES BANKS BORROWING CD CENTRAL BANK COMPETITIVENESS CONSUMER PRICE INDEX COUNTRY REPORTS COUNTRY RISK CREDIT RISK CURRENCY ASSETS CURRENCY BOARD CURRENCY RISK DEBT DEPOSIT ACCOUNTS DEPOSIT DOLLARIZATION DEPOSIT INTEREST DEPOSIT INTEREST RATES DEVALUATION DEVELOPING COUNTRIES DOLLAR DEPOSITS DOMESTIC CURRENCY DOMESTIC INFLATION EMERGING ECONOMIES EMERGING MARKETS EXCHANGE CONTROL EXCHANGE CONTROLS EXCHANGE RATE EXCHANGE RATE DEPRECIATION EXCHANGE RATE RISK EXCHANGE RATES EXPECTED RETURN FINANCIAL GLOBALIZATION FINANCIAL MARKETS FINANCIAL SECTOR FOREIGN ASSETS FOREIGN CURRENCY FOREIGN CURRENCY DEPOSITS FOREIGN EXCHANGE GOVERNMENT DEBT HIGH INFLATION IMPERFECT COMPETITION INDUSTRIAL COUNTRIES INFLATION INFLATION TAX INFLATIONARY POLICIES INTEREST RATE INTEREST RATES INTERNATIONAL FINANCIAL STATISTICS LEGISLATION LOAN MARKETS LOCAL BANKS LOCAL BORROWERS LOCAL CURRENCY M2 MACRO POLICY MACROECONOMIC POLICY MONEY MARKET MONEY SUPPLY NET FOREIGN ASSETS NOMINAL DEPRECIATION NOMINAL DEVALUATION NOMINAL EXCHANGE RATE POLICY CREDIBILITY POLICY RESEARCH PORTFOLIO PRIVATE SECTOR PROFITABILITY RATE OF EXCHANGE REAL EXCHANGE REAL EXCHANGE RATE REAL EXCHANGE RATES REAL INTEREST REAL INTEREST RATE REAL INTEREST RATES REGRESSION ANALYSIS RISK PREMIUM STANDARD DEVIATION WAGES WHOLESALE PRICES Analyzing new data, the authors find that the general trend toward increased use of foreign-currency-denominated bank deposits in emerging markets has continued, despite declines in a few countries. Their analysis of the new data suggests that a sizable fraction (about half, on average) of funds switched to dollar deposit accounts are effectively exported through the banking system, thereby reducing the supply of credit. Moreover, increases in deposit dollarization are associated with increases in offshore deposits, which probably helps to explain the authors' finding that dollarization is associated with an increase in banking spreads. The authors' evidence supports, though only weakly, the conjecture that dollarization would tend to raise wholesale interest rates systematically through a peso premium. In contrast, greater dollarization is clearly associated with a higher pass-through coefficient from exchange rate change to consumer prices, potentially increasing nominal risk in the economy. 2014-08-19T15:22:11Z 2014-08-19T15:22:11Z 2001-12 http://documents.worldbank.org/curated/en/2001/12/1671256/deposit-dollarization-financial-sector-emerging-economies http://hdl.handle.net/10986/19409 English en_US Policy Research Working Paper;No. 2748 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
en_US
topic BANK LENDING
BANKING SYSTEM
BANKNOTES
BANKS
BORROWING
CD
CENTRAL BANK
COMPETITIVENESS
CONSUMER PRICE INDEX
COUNTRY REPORTS
COUNTRY RISK
CREDIT RISK
CURRENCY ASSETS
CURRENCY BOARD
CURRENCY RISK
DEBT
DEPOSIT ACCOUNTS
DEPOSIT DOLLARIZATION
DEPOSIT INTEREST
DEPOSIT INTEREST RATES
DEVALUATION
DEVELOPING COUNTRIES
DOLLAR DEPOSITS
DOMESTIC CURRENCY
DOMESTIC INFLATION
EMERGING ECONOMIES
EMERGING MARKETS
EXCHANGE CONTROL
EXCHANGE CONTROLS
EXCHANGE RATE
EXCHANGE RATE DEPRECIATION
EXCHANGE RATE RISK
EXCHANGE RATES
EXPECTED RETURN
FINANCIAL GLOBALIZATION
FINANCIAL MARKETS
FINANCIAL SECTOR
FOREIGN ASSETS
FOREIGN CURRENCY
FOREIGN CURRENCY DEPOSITS
FOREIGN EXCHANGE
GOVERNMENT DEBT
HIGH INFLATION
IMPERFECT COMPETITION
INDUSTRIAL COUNTRIES
INFLATION
INFLATION TAX
INFLATIONARY POLICIES
INTEREST RATE
INTEREST RATES
INTERNATIONAL FINANCIAL STATISTICS
LEGISLATION
LOAN MARKETS
LOCAL BANKS
LOCAL BORROWERS
LOCAL CURRENCY
M2
MACRO POLICY
MACROECONOMIC POLICY
MONEY MARKET
MONEY SUPPLY
NET FOREIGN ASSETS
NOMINAL DEPRECIATION
NOMINAL DEVALUATION
NOMINAL EXCHANGE RATE
POLICY CREDIBILITY
POLICY RESEARCH
PORTFOLIO
PRIVATE SECTOR
PROFITABILITY
RATE OF EXCHANGE
REAL EXCHANGE
REAL EXCHANGE RATE
REAL EXCHANGE RATES
REAL INTEREST
REAL INTEREST RATE
REAL INTEREST RATES
REGRESSION ANALYSIS
RISK PREMIUM
STANDARD DEVIATION
WAGES
WHOLESALE PRICES
spellingShingle BANK LENDING
BANKING SYSTEM
BANKNOTES
BANKS
BORROWING
CD
CENTRAL BANK
COMPETITIVENESS
CONSUMER PRICE INDEX
COUNTRY REPORTS
COUNTRY RISK
CREDIT RISK
CURRENCY ASSETS
CURRENCY BOARD
CURRENCY RISK
DEBT
DEPOSIT ACCOUNTS
DEPOSIT DOLLARIZATION
DEPOSIT INTEREST
DEPOSIT INTEREST RATES
DEVALUATION
DEVELOPING COUNTRIES
DOLLAR DEPOSITS
DOMESTIC CURRENCY
DOMESTIC INFLATION
EMERGING ECONOMIES
EMERGING MARKETS
EXCHANGE CONTROL
EXCHANGE CONTROLS
EXCHANGE RATE
EXCHANGE RATE DEPRECIATION
EXCHANGE RATE RISK
EXCHANGE RATES
EXPECTED RETURN
FINANCIAL GLOBALIZATION
FINANCIAL MARKETS
FINANCIAL SECTOR
FOREIGN ASSETS
FOREIGN CURRENCY
FOREIGN CURRENCY DEPOSITS
FOREIGN EXCHANGE
GOVERNMENT DEBT
HIGH INFLATION
IMPERFECT COMPETITION
INDUSTRIAL COUNTRIES
INFLATION
INFLATION TAX
INFLATIONARY POLICIES
INTEREST RATE
INTEREST RATES
INTERNATIONAL FINANCIAL STATISTICS
LEGISLATION
LOAN MARKETS
LOCAL BANKS
LOCAL BORROWERS
LOCAL CURRENCY
M2
MACRO POLICY
MACROECONOMIC POLICY
MONEY MARKET
MONEY SUPPLY
NET FOREIGN ASSETS
NOMINAL DEPRECIATION
NOMINAL DEVALUATION
NOMINAL EXCHANGE RATE
POLICY CREDIBILITY
POLICY RESEARCH
PORTFOLIO
PRIVATE SECTOR
PROFITABILITY
RATE OF EXCHANGE
REAL EXCHANGE
REAL EXCHANGE RATE
REAL EXCHANGE RATES
REAL INTEREST
REAL INTEREST RATE
REAL INTEREST RATES
REGRESSION ANALYSIS
RISK PREMIUM
STANDARD DEVIATION
WAGES
WHOLESALE PRICES
Honohan, Patrick
Shi, Anqing
Deposit Dollarization and the Financial Sector in Emerging Economies
relation Policy Research Working Paper;No. 2748
description Analyzing new data, the authors find that the general trend toward increased use of foreign-currency-denominated bank deposits in emerging markets has continued, despite declines in a few countries. Their analysis of the new data suggests that a sizable fraction (about half, on average) of funds switched to dollar deposit accounts are effectively exported through the banking system, thereby reducing the supply of credit. Moreover, increases in deposit dollarization are associated with increases in offshore deposits, which probably helps to explain the authors' finding that dollarization is associated with an increase in banking spreads. The authors' evidence supports, though only weakly, the conjecture that dollarization would tend to raise wholesale interest rates systematically through a peso premium. In contrast, greater dollarization is clearly associated with a higher pass-through coefficient from exchange rate change to consumer prices, potentially increasing nominal risk in the economy.
format Publications & Research :: Policy Research Working Paper
author Honohan, Patrick
Shi, Anqing
author_facet Honohan, Patrick
Shi, Anqing
author_sort Honohan, Patrick
title Deposit Dollarization and the Financial Sector in Emerging Economies
title_short Deposit Dollarization and the Financial Sector in Emerging Economies
title_full Deposit Dollarization and the Financial Sector in Emerging Economies
title_fullStr Deposit Dollarization and the Financial Sector in Emerging Economies
title_full_unstemmed Deposit Dollarization and the Financial Sector in Emerging Economies
title_sort deposit dollarization and the financial sector in emerging economies
publisher World Bank, Washington, DC
publishDate 2014
url http://documents.worldbank.org/curated/en/2001/12/1671256/deposit-dollarization-financial-sector-emerging-economies
http://hdl.handle.net/10986/19409
_version_ 1764439791483486208