Dollarization, Exchange Rate Regimes and Government Quality

Honig, Adam

doi:10.2139/ssrn.305497

Cited by 21 publications

(22 citation statements)

References 32 publications

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“…The negative impact of joining the EU on FD, on the other hand, is depicted by Levy-Yeyati (2006), Honig (2009) and the related institutional view (De Nicoló et al, 2003. According to this view, a credible government (of high institutional quality) by following policies that promote long-run currency stability can build up its reputation and encourage confidence in the domestic currency.…”

Section: Introductionmentioning

confidence: 99%

“…These are the rate of inflation according to the currency substitution view (Savastano, 1996), the minimum variance portfolio (mvp) dollarization share according to the portfolio view (Ize and Levy-Yeyati, 2003), the rate of depreciation to control for valuation effects in the measures of dollarization (Arteta, 2005), the interest rate differential to test the departure from uncovered interest rate parity (Basso et al, 2007), and an indicator of international financial integration (Lane and Milesi-Ferretti, 2007) as a measure of financial openness (Luca and Petrova, 2008;Honig, 2009;Neanidis and Savva, 2009). 4 To briefly explain the expected influence of these variables on FD note that Barajas and Morales (2003), Luca and Petrova (2008), and Neanidis and Savva (2009) have shown banks to limit their exchange rate risk by lending in foreign currency as they receive more foreign currency deposits suggesting the positive effect of DD on LD in equation (2).…”

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confidence: 99%

“…In addition, we instrument for our indicator of financial openness and, for the case of LD, for DD and banks' net foreign assets. Following the most recent articles in the literature (Luca and Petrova, 2008;Honig, 2009;Neanidis and Savva, 2009), we use as instruments the once lagged values of the potentially endogenous variables. 7 We also extent the instrument set to the second lag, the third lag, and any combination of these lags for the sake of robustness.…”

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confidence: 99%

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Financial Dollarization and European Union Membership

Neanidis

2010

International Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We analyze the effect of European Union (EU) membership on financial dollarization for the Central and Eastern European countries. Using a unique monthly dataset that spans about two decades, we find that both the accession process toward EU membership and EU entry have a direct impact on deposit and loan dollarization. EU membership reduces deposit dollarization while it increases loan dollarization. The negative effect on deposit dollarization captures the increased confidence of the private sector in the domestic currency as they consider the EU admission process to reflect their government's commitment in promoting policies of longrun currency stability. The positive impact on credit dollarization is the outcome of a greater convergence of exchange rates to the euro and the subsequent anticipation for a lower currency risk, which diminishes the cost of foreign currency borrowing. Terms of use: Documents inJEL-Code: E44, F31, G11, G20.

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Section: Introductionmentioning

confidence: 99%

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Financial Dollarization and European Union Membership

Neanidis

2010

International Finance

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“…On this subject, Honig (2009) found that improving government quality and fulfilling its promises toward price stability and lower exchange rate policies will be the optimal policies to de-dollarize the economy. In addition, the relationship between financial institution improvement and financial dollarization was investigated.…”

Section: Resultsmentioning

confidence: 99%

“…However, in order to identify major factors that contribute to dollarize an economy, Honig (2009) studied dollar credit to total credit, dollar credit to total assets, dollar deposits to total deposits, dollar deposits to total liabilities, total dollarization to total credit and deposits, and total dollarization to total credit and liabilities using various techniques of statistics and descriptive analysis. The target was to figure out which one of the following factors: exchange rate regimes and government quality were the primary leading factor in dollarization process.…”

Section: Introductionmentioning

confidence: 99%

Dollarization in East Africa: Causes, Consequences, and Future Forecasts

Musse

Echchabi²

2017

Binus Business Review

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The dollarization phenomenon has been widespread among the East African countries for many decades. This trend results in several consequences that might be either beneficial or harmful to these countries and their likes. The objective of this research was to empirically examine the causes, consequences and the future scenarios of dollarization in one of the leading regional countries such as Somalia. The research used a survey of over 100 respondents and applied descriptive statistics and t-tests to achieve the above objectives. The findings show that the main causes of Dollarization in Somalia are the implementation of the Hawallah (money transfer) system, the remarkable absence of the central bank and other monitoring financial authorities, the increasing exports and imports of the Somalian economy, the loss of confidence in the local Somalian Shilling, and the relative ease at which the Somalian Shilling can be printed and manipulated by selected market players. These causes are found to be mainly triggered by the revenue from exports, the policies and regulations implemented by the Somali government, the Somali Diaspora, and the international aid organizations. This has resulted in the foreign traders buying Somali goods at a relatively lower price and taking advantage of the depreciated Somali Shilling against most international currencies.

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Fear of floating and domestic liability dollarization

Honig

2005

Emerging Markets Review

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Dollarization, Exchange Rate Regimes and Government Quality

Cited by 21 publications

References 32 publications

Financial Dollarization and European Union Membership

Financial Dollarization and European Union Membership

Dollarization in East Africa: Causes, Consequences, and Future Forecasts

Fear of floating and domestic liability dollarization

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