ENGLISH

The Impact of Deposit Dollarization on Financial Deepening

By Eduardo Court , Emre Ozsoz , Erick W. Rengifo

Book information

Publisher
Pontificia Universidad Católica del Perú (PUCP) - CENTRUM
Year
2012
Language
english
Format
PDF
Filesize
164 kB (167937 bytes)
Series
CENTRUM Católica’s Working Paper Series No. 2012-09-0002 / September 2012
Pages
\11
Topic
Economy
Time added
2023-01-01 00:09:20
dollarizationFinancial DeepeningFinancial DevelopmentPeru

Description

Banks in highly dollarized economies face risks that significantly affect their ability to perform their financial intermediation role. In these economies, dollarization plays a dual role: on one hand, it provides a hedging instrument protecting the value of savings and, on the other hand, it generates currency mismatch on banks’ balance sheets and increases default risk. Through these effects deposit dollarization can impact credit extension. This paper investigates the role of deposit dollarization on the financial depth of 44 emerging market economies. Findings suggest that deposit dollarization has a consistent and negative impact on financial deepening, except in high-inflation economies.

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