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.
| Identifer | oai:union.ndltd.org:METU/oai:etd.lib.metu.edu.tr:http://etd.lib.metu.edu.tr/upload/12606739/index.pdf |
| Date | 01 December 2003 |
| Creators | Uzun, Arzu |
| Contributors | Ozmen, Erdal |
| Publisher | METU |
| Source Sets | Middle East Technical Univ. |
| Language | English |
| Detected Language | English |
| Type | M.S. Thesis |
| Format | text/pdf |
| Rights | To liberate the content for public access |
Page generated in 0.0012 seconds