Publication: Deposit Dollarization and the Financial Sector in Emerging Economies
Date
2001-12
ISSN
Published
2001-12
Author(s)
Honohan, Patrick
Shi, Anqing
Abstract
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.
Link to Data Set
Citation
“Honohan, Patrick; Shi, Anqing. 2001. Deposit Dollarization and the Financial Sector in Emerging Economies. Policy Research Working Paper;No. 2748. © World Bank, Washington, DC. http://hdl.handle.net/10986/19409 License: CC BY 3.0 IGO.”
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