Do the Drivers of Loan Dollarisation Differ between CESEE and Latin America? A Meta-Analysis

36 Pages Posted: 2 Apr 2014

See all articles by Mariya Stankeva Hake

Mariya Stankeva Hake

Oesterreichische Nationalbank (OeNB)

Fernando López Vicente

Banco de España

Luis Molina

Banco de España

Date Written: April 2, 2014

Abstract

In this paper we compare the determinants of loan dollarisation in two emerging market regions, namely Central, Eastern and Southeastern Europe (CESEE) and Latin America, by means of a meta-analysis of 32 studies that provide around 1,200 estimated coefficients for six drivers of foreign currency lending. One common pattern we identify is that macroeconomic instability (as expressed by inflation volatility) and banks’ funding in foreign currency play a significant role in explaining loan dollarisation in both regions. By contrast, the interest rate differential appears to be a key determinant only in Latin America, while the positive impact of exchange rate volatility on dollarisation implies a more prominent role for supply factors in the CESEE region. While the robustness of the results has been verified, our meta-analysis shows that estimates reported in the literature tend to be influenced by study characteristics such as the methodology applied and the data used.

Keywords: foreign currency loans, CESEE, Latin America, meta-regression, random effects maximum likelihood.

JEL Classification: C5, E52, F31, O57, P20.

Suggested Citation

Stankeva Hake, Mariya and López Vicente, Fernando and Molina, Luis, Do the Drivers of Loan Dollarisation Differ between CESEE and Latin America? A Meta-Analysis (April 2, 2014). Banco de Espana Working Paper No. 1406. Available at SSRN: https://ssrn.com/abstract=2419385 or http://dx.doi.org/10.2139/ssrn.2419385

Mariya Stankeva Hake (Contact Author)

Oesterreichische Nationalbank (OeNB) ( email )

Otto-Wagner-Platz 3, PO Box 61
Vienna,
1010 Vienna, A-1011
Austria

Fernando López Vicente

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Luis Molina

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

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