Regional Inflation and Financial Dollarization

Abstract

We exploit variation in consumer price inflation across 71 Russian regions to examine the relationship between the perceived stability of the domestic currency and financial dollarization. Our results show that regions with higher inflation experience an increase in deposit dollarization and a decrease in the dollarization of loans to households and firms in non-tradable sectors. The negative impact of inflation on credit dollarization is weaker in regions with less integrated banking markets. This suggests that the asset-liability management of banks constrains the currency-portfolio choices of both households and firms without a natural currency hedge.JEL codes: E31, E42, E44, F36, G21, P22, P24

Regional Dollarization Differences and Determinants: The Case of Turkey

“…Therefore, with this study, it is aimed to fill a gap that the researches in the literature have not addressed so far. The closest study to the subject that inspired this paper is Brown, Haas & Sokolov (2013) study titled "Regional Inflation and Financial Dollarization" for 71 cities in the Russian Federation. In this study, the authors examine the relationship between exchange rate and financial dollarization through regional inflation data.…”