Thesis (M.M. (Finance & Investment))--University of the Witwatersrand, Faculty of Commerce, Law and Management, Graduate School of Business Administration, 2013. / This study examined the portfolio theory of dollarization of Ize and Yeyati (2003) to see if it holds in Argentina and Tanzania, this study was conducted to see if the variables of the exchange rate volatility and inflation rate fluctuation contribute to dollarization. Moreover, it shows that there is a relationship between the level of dollarization on nominal interest rate, inflation rate and exchange rate as the portfolio theory predict. The Chow test (Chow (1960) was used to test for the equality of coefficients in Argentina and Tanzania as separate samples. The results indicated that the correlation analysis and regression analysis in both countries there is disagreement over the assumptions and showed that exchange rate, inflation rate and interest rates do not have a significant effect on the level of dollarization. This means that the theory of portfolio do not hold for the case of Tanzania and Argentina and it is suggested that because the nature of the relationship is not linear, a new research design can be developed or it simply means that the portfolio theory is incorrect. We recommend that further research be pursued using the same variables as in this study but using different forms, such as using real as opposed to using nominal values, using non-linear forms instead of using a linear estimation method. Or the search for the significant explanatory variable of dollarization and the variables could only be included in a process that calls for the formulation of new theory to replace the current theory. The new variables to be included are government quality, monetary policy agility, individual heterogeneity, domestic debt, default risk, institutional quality and financial integration.

Thesis (Ph. D.)--University of Washington, 2007. / Vita. Includes bibliographical references (p. 62-67).

This study investigates the implications of financial dollarization for inflation targeting framework. To this end, monetary policy rule, inflation targeting performance and international reserves equations are estimated for twenty four inflation targeting countries with different levels of financial dollarization. The results based on the panel data estimations indicate that monetary policy rule and behavior of accumulating international reserves are affected by the degree of financial dollarization. Furthermore, the study finds that inflation targeting performance is not affected by the level of financial dollarization. Consequently, the empirical analysis suggests that even if financial dollarization does not affect the inflation targeting performance, it does affect the monetary policy rule and the variables to be taken into account to reach the target.

Thesis (Ph. D.)--University of California, San Diego, 2009. / Title from first page of PDF file (viewed September 17, 2009). Available via ProQuest Digital Dissertations. Vita. Includes bibliographical references (p. 234-241).

Financial dollarization, defined as the substantial presence of foreign currency denominated assets and liabilities in the balance sheets of the main sectors of an economy, is a widespread phenomenon among developing economies, especially in Latin America and Turkey. Since financial dollarization often causes financial fragility and limits the effectiveness of monetary policy, the causes and consequences of it and dedollarization strategies have been placed at the forefront of policy debates especially in developing countries. The purpose of this study is to analyse the determinants of corporate sector asset and liability dollarization in ten Latin American countries (Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Mexico, Peru, Uruguay and Venezuela) and Turkey for the period 1990-2001. To this end, this study considers the effects of monetary policy stance (exchange rate flexibility and adoption of a de facto inflation targeting regime), institutional structure (governance) and macroeconomic stance variables (volatilities of inflation and real effective exchange rates) on financial dollarization. The results based on panel data estimations suggest that high and volatile inflation and depreciation of domestic currency induce a switch to dollar denominated assets and liabilities. Furthermore, exchange rate regime flexibility appears to reduce liability dollarization and encourage asset dollarization. Finally, the empirical analysis supports the hypothesis that adoption of inflation targeting regime and strengthening the institutional structure are significant in decreasing the level of financial dollarization.

The purpose of this study is to analyze financial dollarization phenomenon in the Turkish economy since the beginning of 1990&rsquo / s based on Ize and Levy Yeyati&rsquo / s (2003) minimum variance portfolio (MVP) framework. Financial dollarization, steamed by unfavorable macroeconomic conditions and uncertainties, is revealed by the experiences of recent banking and financial crisis as carrying significant drawbacks such that it complicates economic policy implementation and contains the seeds of fragility for the whole economy as well. Although, considerable progress has been achieved in reducing inflation levels and sustaining macroeconomic stability, financial dollarization displays rather an enduring stance. MVP approach is based on optimizing the currency composition of financial contracts depending on the risk and the return profile of agents&rsquo / portfolios. According to this approach, financial dollarization is an increasing function of the inflation volatility and a decreasing function of the real exchange rate volatility. In line with this framework, financial dollarization in the Turkish economy during 1990-2011 period is studied by also considering other important macroeconomic risk indicators and it is tried to shed some light on the success of inflation targeting policy in dealing with dollarization phenomenon.

近來有許多國家，因為政府對於匯率不當的干預或是採行不恰當的匯率制度，而引發出一連串貨幣危機。對於貨幣危機的處理，經濟學家提出了三種解決方案，一是實行資本管制，限制資本自由流動；二是建立互相援助的機制，透過全球性的國際放款機構(例如IMF)，在外資外逃、貨幣貶值時，及時對受災國伸出援手；而第三就是實行美元化的貨幣政策。 而美元化是否為最佳的解決方案，為眾多經濟學者爭論不休的議題，鑑此，本文延續Lamdany and Dorlhiac(1987)的模型，探討ㄧ個發生高通貨膨脹的小國，實施美元化政策對經濟體之福利影響。本文中顯示，若考量一國長遠的福利，則政府實行美元化政策，未必是最佳的方案。

How do financial variables, such as firms’ cash flow and banks’ capital, affect macroeconomic variables, such as investment and GDP growth? What are the macroeconomic effects of exchange rate depreciation in countries where firms and households have extensive foreign-currency liabilities? The doctoral thesis Empirical Essays on Macro-Financial Linkages consists of four separate papers in the field of empirical macroeconomics. The first three papers investigate the macroeconomic implications of financial-market imperfections. Imperfect information between borrowers and lenders makes it more costly for firms to finance investments with external funds than with internal funds. The external finance risk premium depends on the strength of firm balance sheets, which hence affects firm investment. The first paper, The Effect of Cash Flow on Investment: An Empirical Test of the Balance Sheet Channel, examines the importance of financial constraints for investment using a large Swedish firm-level data set which includes many smaller firms (where balance sheet effects are likely to be especially important). I find a positive effect of cash flow on investment, controlling for fundamental determinants of investment and any information in cash flow about investment opportunities. As predicted by the balance sheet channel, the estimated effect of cash flow on investment is especially large for firms which, a priori, are more likely to be financially constrained (low-dividend, small and non-group firms). Moreover, the investment-cash flow sensitivity is significantly larger and more persistent during the first half of the sample period, which includes a severe banking crisis and recession. The second paper, Credit Matters: Empirical Evidence on U.S. Macro-Financial Linkages, written jointly with Tamim Bayoumi, estimates the impact of an adverse shock to bank capital on credit availability and spending in the United States, allowing for feedback from spending and income through the balance sheets of banks, firms and households. We find that an exogenous fall in the bank capital/asset ratio by one percentage point reduces real GDP by some 1 ½ percent through its effects on credit availability, while an exogenous fall in demand of 1 percent of GDP is gradually magnified to around 2 percent through financial feedback effects. The third paper, The Effects of Real Exchange Rate Shocks in an Economy with Extreme Liability Dollarization, studies the effects of real exchange rate depreciation in Bolivia, where over 95 percent of bank credit is denominated in dollars. Currency depreciation increases the domestic-currency value of foreign-currency liabilities and the debt service burden, thus adversely affecting firm balance sheets. A key issue for policymakers in countries with widespread foreign-currency borrowing is whether depreciation would have the standard, expansionary effect on output, or if an adverse balance sheet would dominate. I find that real exchange depreciation has negligible effects on output, since a contractionary balance-sheet effect on investment is counteracted by the standard expansionary effect on net exports. The fourth paper, Uncovered Interest Parity in a Partially Dollarized Developing Country: Does UIP Hold in Bolivia? (And If Not, Why Not?), studies another aspect of macro-financial linkages. The so-called uncovered interest parity (UIP) condition states that interest rate differentials compensate for expected exchange rate changes, equalizing the expected returns from holding assets which only differ in terms of currency denomination. Because of data availability problems, there is a lack of empirical tests of UIP for developing countries. The paper studies the case of Bolivia, where there are bank accounts which only differ in terms of currency denomination (bolivianos or U.S. dollars). I find that UIP does not hold in Bolivia, but that the deviations are smaller than in most other studies of developed and emerging economies. / Diss. Stockholm : Handelshögskolan, 2009 Sammanfattning jämte 4 uppsatser

The aim of this thesis was to analyse and compare tax morale and its determinants in South Africa and Zimbabwe, as well as in Zimbabwe in different economic environments. The study applied the standard models of tax evasion, game theory, prospect theory, agent-based theory and slippery slope framework to explain the variability in the determinants of tax morale between South Africa and Zimbabwe under different economic and political environments. The study becomes novel in that it provides a comparative analysis of the determinants of the tax morale between Zimbabwe and South Africa under contrasting economic and political time scales. The study also tested a new variable, namely hunger, on how it affects tax morale in Zimbabwe and South Africa. The study was guided by quantitative research which was used to inform the study. Data was collected using questionnaires from the 2010-2014 and 2017-2020 World Values Survey (WVS). For Zimbabwe, Wave 6 and Wave 7 had a sample size of 1500 and 1200 respectively. The Wave 6 survey for South Africa had 3531 participants. Data was analysed using STATA software 2013 Version. The study’s dependent variable, tax morale and independent variables included marital status, age, income level, employment and religion among others, and analysed them using the Ordered Logit Model. The Ordered Logit Model was used to empirically model the effects of the identified variables on tax morale. The study concludes with an understanding of how tax morale and its determinants is crucial for governments in their bid to boost voluntary compliance. Also, different economic milieus for a particular country affect the level of tax morale significantly. Tax morale was established to be high when Zimbabwe was experiencing economic growth due to the introduction of multi-currency, herein called the dollarization period, and the opposite was true for the post-dollarization era. Surprisingly, the study’s results showed that Zimbabweans have a higher tax morale than South Africans, who have better standards of living. In addition, the determinants of tax morale also differ from one economic situation to another and from one country to another. Corruption, which is a menace in both countries under study, has proven to be an important factor that influences tax morale. Results of all the models show that demographic factors have little effect on tax morale. The study introduced an important variable of hunger in its analysis of determinants of tax morale. Though this variable was insignificant for South Africa, the study showed that there is a negative relationship between hunger and tax morale for Zimbabwe in both economic situations. Based on the thesis’s findings, policy makers should consider the eradication of corruption and hunger in order to boost tax morale, which in turn improves tax compliance. Also, policy makers should include improvement in the perception of democracy in the mix of enhancement strategies of tax compliance. / Economics / D. Com. (Economics)

This study aims to investigate currency substitution and financial dollarization in Turkey. The extend of dollarization in Turkey appears to be very high according to both the conventional currency substitution and the recently developed financial dollarization measures. This has serious policy implications as a source of financial fragility through currency/maturity mismatches and balance sheet effects. The empirical part of this study contained an investigation of the long run relationships between the variables in a system containing currency substitution ratio, expected exchange rate change and rates of return on domestic and foreign currency denominated assets. The results of the Johansen cointegration analysis based on quarterly data for the 1987-2004 period appeared not to be strongly supporting the General Portfolio Balance Model (GPBM). The theoretical part of this study suggests that the GPBM can be reduced to the Sequential Portfolio Balance Model (SPBM) under the uncovered interest parity (UIP) hypothesis. Consequently, the GPBM may be misleading under UIP. The Johansen cointegration results suggested the validity of the UIP for the Turkish data. The estimation of the SPBM suggested that there is a long-run relationship between currency substitution and expected exchange rate change in Turkey. The elasticity of currency substitution appeared to be high but consistent with those estimated for other high inflation developing countries. The results further supported the presence of a ratchet/hysteresis effect proxied by a trend variable. All these results are consistent with the argument that currency substitution and financial dollarization are important especially in high inflation countries.