Determinants of Dollarization: The Banking Side

37 Pages Posted: 1 Feb 2006

See all articles by Luis Catão

Luis Catão

International Monetary Fund (IMF)

Marco E. Terrones

International Monetary Fund (IMF)

Date Written: August 2000

Abstract

Dollarization in financial intermediation has exhibited a widely diverse pattern across countries. Empirical work relating it to macroeconomic variables has had only limited success in explaining the phenomenon. This paper presents a two-currency banking model to show that deposit and loan dollarization are determined by a broader set of factors. These include interest rates and exchange rate risk, as well as structural factors related to costly banking, credit market imperfections, and availability of tradable collateral. The direction in which dollarization tends to move with macroeconomic shocks is shown to depend on those factors as well as on initial dollarization levels.

Keywords: Dollarization, Money and Banking, Emerging Markets

JEL Classification: E43, E44, G21

Suggested Citation

Catão, Luis and Terrones, Marco E., Determinants of Dollarization: The Banking Side (August 2000). IMF Working Paper, Vol. , pp. 1-37, 2000. Available at SSRN: https://ssrn.com/abstract=879949

Luis Catão (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Marco E. Terrones

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-4329 (Phone)

HOME PAGE: http://imf.org/external/np/CV/AuthorCV.aspx?AuthID=171

Register to save articles to
your library

Register

Paper statistics

Downloads
156
Abstract Views
850
rank
192,508
PlumX Metrics