Regional Inflation, Financial Integration and Dollarization

Forthcoming, Review of Finance

63 Pages Posted: 10 Dec 2013 Last revised: 1 Apr 2017

See all articles by Martin Brown

Martin Brown

University of St. Gallen

Ralph De Haas

European Bank for Reconstruction and Development; Centre for Economic Policy Research (CEPR); Tilburg University - Department of Finance

Vladimir Sokolov

National Research University Higher School of Economics

Date Written: March 31, 2017

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 the dollarization of household deposits and a decrease in the dollarization of loans to households and to firms in non-tradable sectors. The impact of inflation on credit dollarization is weaker in regions with less integrated banking markets. This suggests that the currency-portfolio choices of households and firms may be constrained by the asset-liability management of banks..

Keywords: Financial dollarization, financial integration, regional inflation

JEL Classification: E31, E42, E44, F36, G21, P22, P24

Suggested Citation

Brown, Martin and De Haas, Ralph and Sokolov, Vladimir, Regional Inflation, Financial Integration and Dollarization (March 31, 2017). Forthcoming, Review of Finance. Available at SSRN: https://ssrn.com/abstract=2365425 or http://dx.doi.org/10.2139/ssrn.2365425

Martin Brown (Contact Author)

University of St. Gallen ( email )

Unterer Graben 21
St. Gallen, CH-9000
Switzerland

Ralph De Haas

European Bank for Reconstruction and Development ( email )

One Exchange Square
London, EC2A 2JN
United Kingdom

HOME PAGE: www.ebrd.com

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Vladimir Sokolov

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

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