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:	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
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

Deposit Dollarization and the Financial Sector in Emerging Economies

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