Dollarization of Deposits in the Short and Long Run: Evidence from CESE Countries

Abstract

In this paper, we study the drivers of permanent and transitory deposit dollarization for a sample of CESE countries using panel cointegration techniques. The results suggest that a positive cointegration relationship exists between permanent dollarization and Minimum Variance Portfolio (MVP) share. This provides an additional empirical validation of the MVP method as the standard tool for analyzing financial dollarization. In the long-run, agents make savings decisions based on the relative volatilities of inflation and nominal depreciation rates and do not take into account the interest rate spread. Somewhat different factors affect dollarization in the short rather than in the long-run. Namely, apart from MVP share, transitory deposit dollarization is driven, also, by the real interest rate spread. Our results suggest that affecting dollarization through changes in the interest rate spread may have a short-term impact. In the long-run, however, for de-dollarization it is critical to reduce the volatility of inflation compared to the volatility of exchange rate depreciation.

Key words: Permanent and transitory dollarization, Transition economies.
JEL: C33, F31, G11.

U ovom radu proučavamo uzročnike permanentne i privremene dolarizacije depozita na uzorku CESE zemalja pomoću tehnike panel kointegracije. Rezultati upućuju na pozitivnu kointegracionu vezu između permanentne dolarizacije i udela Minimum Variance Portfolio (MVP). Ovo omogućava dodatnu empirijsku potvrdu MVP metoda kao standardnog načina analize finansijske dolarizacije. U dugom roku, agenti donose odluke o štednji bazirane na relativnim volatilnostima inflacije i stopama nominalne depresijacije, ne uzimajući u obzir raspon kamatne stope. Nešto drugačiji faktori utiču na dolarizaciju u kratkom, pre nego u dugom roku. Naime, u poređenju sa MVP udelom, privremena dolarizacija je vođena, takođe, rasponom realne kamatne stope. Naši rezultati sugerišu da uticaj na dolarizaciju putem promena raspona kamatne stope može biti kratkoročan. U dugom roku, međutim, za smanjenje dolarizacije je kritično smanjivanje volatilnosti inflacije u poređenju sa volatilnošću depresijacije deviznog kursa.

Ključne reči: Permanentna i privremena dolarizacija, Tranzicione ekonomije.