The Impact of Deposit Dollarization on Financial Deepening

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 the one hand, it provides a hedging instrument protecting the value of savings; on the other hand, it generates a currency mismatch on banks' balance sheets and increases default risk. Through these effects deposit dollarization can affect credit extension. This paper investigates the role of deposit dollarization on the financial depth of forty-four emerging market economies. Findings suggest that deposit dollarization has a consistent and negative impact on financial deepening, except in high-inflation economies.     

DOLLARIZATION FOR ARGENTINA

In January 1999, President Carlos Menem suggested replacing the Argentine peso with the U.S. dollar. President Menem's announcement has sparked a debate throughout Latin America and Eastern Europe about what has been termed "dollarization." That debate prompted U.S. Treasury Secretary Robert Rubin to deliver a major policy speech on alternative exchange-rate regimes on April 21, 1999 and the U.S. Senate Banking Committee to hold dollarization hearings the following day featuring Fed Chairman Alan Greenspan and Deputy Secretary of the Treasury Lawrence Summers.
This article presents a case for officially dollarizing Argentina. Dollarization is not new. Unofficial dollarization is widespread in emerging market countries; in fact, as much as 70% of the stock of U.S. dollars now circulates abroad. Twenty-eight countries and dependent territories are officially dollarized. Although official dollarization would result in Argentina losing seigniorage of about 0.22 percent of GDP, the author estimates that this cost would be more than offset by a reduction in interest rates that would increase Argentina's trend rate of GDP growth by about two percent.
After debunking the most common criticisms of dollarization, the article closes by offering recommendations about the specific form of dollarization and presenting a detailed dollarization statute for Argentina. The author proposes a competitive currency regime for Argentina, one in which all foreign money would be legal tender.     

Financial dollarization: Short-run determinants in transition economies

This paper examines the determinants of financial dollarization in transition economies from a short-run perspective. Using aggregate monthly data of deposit and loan dollarization we study the drivers of short-term fluctuations in dollarization and test their importance at different levels of dollarization. The results provide evidence that (a) the positive (negative) short-run effects of depreciation (monetary expansion) on deposit dollarization are exacerbated in high-dollarization countries; (b) short-run loan dollarization is mainly driven by banks matching of domestic loans and deposits, currency matching of assets and liabilities, international financial integration, and institutional quality; and (c) both types of short-run dollarization are affected by interest rate differentials and deviations from desired dollarization.     

Dollarization of bank deposits: Causes and consequences

This paper assesses the benefits and risks associated with dollarization of bank deposits. We provide novel empirical evidence on the determinants of deposit dollarization, its role in promoting financial development, and on whether dollarization is associated with financial instability. We find that: (a) the credibility of macroeconomic policy and the quality of institutions are both key determinants of cross-country variations in dollarization; (b) dollarization is likely to promote financial deepening only in a high inflation environment; and (c) financial instability is likely higher in dollarized economies. The implications of these findings for financial sector and monetary policies are briefly discussed.     

Financial sector development and dollarization in emerging economies

This paper discusses important features of financial dollarization and its implications for the macro economy and financial sector deepening. Despite the need to slow down the rate of inflation and keep exchange rates under control, to achieve growth and economic development, monetary policies may permit increases in the base money to keep pace with real GDP growth. In heavily dollarized economies, during periods of sharp devaluations of the domestic currency, financial assets and liabilities shift toward foreign currency, exacerbating downward pressure on the exchange rate. When central banks face pressures to keep the exchange rate steady in nominal terms, interest rates in the domestic currency are set at levels substantially higher than those on dollar assets. In such states of the world, banks prefer to lend to the government sector at these higher rates than to the private sector. Although private firms may benefit from lower rates on dollar loans, they also face significant exchange rate or currency risk due to the currency mismatch emerging from their dollar debt while their receivables may tilt toward domestic currency denominated instruments. This weakens their balance sheet, which in turn increases the exposure of the banking sector to a variety of risks.     

Financial dollarization: The role of foreign-owned banks and interest rates

Why in many economies households and firms borrow and make deposits in foreign currency? Expanding on the existing literature, our framework addresses this question allowing for interest rate differentials and access to foreign funds to play a role in explaining this process of asset substitution or financial dollarization. Using a newly compiled data set on transition economies and employing a standard panel as well as a panel-VAR methodology we find that increasing access to foreign funds leads to higher credit dollarization, while it decreases deposit dollarization. Interest rate differentials matter for the dollarization of both loans and deposits.     

企业杠杆率、宏观经济景气指数与系统性金融风险

打赢防范化解重大金融风险攻坚战是打好"三大攻坚战"的重要任务之一。本文在对企业杠杆率、宏观经济景气指数与系统性金融风险关联性进行理论分析的基础上,利用复合系统性压力指数法测度了我国系统性金融风险,并建立了马尔可夫区制状态转换模型,以挖掘企业杠杆率、宏观经济景气指数及系统性金融风险之间的非线性动态关联机制。研究表明,样本期内我国系统性金融风险水平波动明显;企业杠杆率、宏观经济景气指数与系统性金融风险间存在动态关联,且两区制特征明显,高压力时期的关联效应比低压力时期更显著;企业杠杆率对系统性金融风险的直接影响不显著,但会通过影响宏观经济对系统性金融风险产生间接影响;宏观经济景气指数与系统性金融风险相互间存在负向影响。鉴此,现阶段应控制好从"结构性去杠杆"向"稳杠杆"转变的节奏,利用"双支柱调控"熨平局部金融失衡和杠杆结构性问题;同时,密切关注部门间金融风险的交叉传染,提升经济发展质量,进而从根本上防范化解系统性金融风险。     

Dollarization,Seigniorage, and Prices: The Case of North Korea

This study employs a general equilibrium monetary search model to examine the effects of the recent dollarization in North Korea on seigniorage and prices. Maximum seigniorage is generated at a high rate of money growth when dollarization is mild. However, under a high degree of dollarization seigniorage declines sharply when the money growth rate is high. Accordingly, seigniorage can be increased by de-dollarizing the economy through lowering the money growth rate. This finding implies that the post-2013 price stabilization may be a result of the restriction on printing of money with the aim of increasing seigniorage. This finding also recognizes that the North Korean authorities have little room for maneuver on monetary policy under the conditions of widespread dollarization.     

Dollars, Debt, and International Financial Institutions: Dedollarizing Multilateral Lending

Financial dollarization is increasingly seen as a concern becauseof its tendency to contribute to financial crises and outputvolatility. As a result the debate on financial dollarizationhas shifted in favor of a more proactive stance on dedollarization.While often neglected, lending from international financialinstitutions is an important source of financial dollarizationin emerging economies and must be considered in any dedollarizationstrategy. This article revisits old and new arguments in favorof international financial institution lending in the localcurrency and argues that any such initiative should rely, atleast initially, on demand from residents seeking stable returnsin units of the local consumption basket but who are reluctantto take on sovereign risk. Superior enforcement capacity enablesinternational financial institutions to intermediate these savings,currently invested in dollarized foreign assets, back into thelocal economy. The international financial institutions canoffer investment-grade local currency bonds and use the proceedsto dedollarize their own lending to noninvestment-grade countries,thereby reducing financial dollarization and fostering the developmentof local currency markets.     

Financial dollarization and systemic risks: New empirical evidence

This paper explores the persistence of financial dollarization in a group of 79 economies with different levels of development. Our main hypothesis is that a high level of domestic debt combined with default risk explains this persistence, even after a decline in inflation rates. Using the generalized method of moments (GMM) in a panel data analysis, our results show that inflation risks caused by increasing probability of default account for financial dollarization more than inflation rate itself. After the decrease in inflation rates, the foreign currency-denominated deposits remain large because of the high debt-to-GDP ratios, particularly in speculative-grade economies. High public indebtedness leads to expectations of default. Dollarization is a rational response to the future inflation associated with investors' expectations of default observed in highly indebted economies.     

External shocks, U.S. monetary policy and macroeconomic fluctuations in emerging markets

Estimated structural VARs show that external shocks are an important source of macroeconomic fluctuations in emerging markets. Furthermore, U.S. monetary policy shocks affect interest rates and the exchange rate in a typical emerging market quickly and strongly. The price level and real output in a typical emerging market respond to U.S. monetary policy shocks by more than the price level and real output in the U.S. itself. These findings are consistent with the idea that “when the U.S. sneezes, emerging markets catch a cold.” At the same time, U.S. monetary policy shocks are not important for emerging markets relative to other kinds of external shocks.     

Dollarization in Emerging Markets: Evidence from Georgia

This paper studies dollarization using the implications of three versions of a money-in-utility function model. These versions accentuate the roles of the exchange rate, the interest rates on foreign and domestic currencies time deposits, and domestic and foreign inflation. Monthly Georgian data for the period 1996-2007 are employed in the analysis. Findings indicate that the U.S. dollar is a strong substitute for the domestic currency and has a significant share in domestic liquidity services. The historical dollarization is well explained by the exchange rate model.     

Monetary policy in emerging markets: Can liability dollarization explain contractionary devaluations?

In emerging markets, external debt is denominated almost entirely in large, developed country currencies such as the U.S. dollar. This liability dollarization offers a channel through which exchange rate variation can lead to business cycle instability. When firms' assets are denominated in domestic currency and liabilities are denominated in foreign currency, an exchange rate depreciation worsens firms' balance sheets, which leads to higher capital costs and contractions in capital spending. To illustrate this, I construct a quantitative, sticky price, small open economy model in which a monetary policy induced devaluation leads to a persistent contraction in output. In this model, fixed exchange rates offer greater stability than an interest rule that targets inflation.     

An examination of real interest rates in the United States, Canada, France, and Germany during the recent floating exchange rate period

This study reexamines the international linkage of ex-ante real interest rates using the theory of cointegrated processes. The univariate unit root tests suggest the existence of a nonstationary real interest rate in the United States, Canada, and (the former) West Germany. An ex-ante real interest rate is obtained by subtracting estimates of inflation from the nominal interest rate. The expected inflation rates are obtained by modeling changes in monthly CPI values as autoregressive moving average (ARMA) processes. A multivariate test for unit roots indicates that there are two cointegrating vectors, or one common stochastic trend, for the system of three nonstationary real interest rates. In addition, the log-likelihood ratio test fails to reject the null hypothesis that, in the long run, real interest rates in the United States are equal to those in Canada and West Germany.     

Dollarization does promote trade

This study re-evaluates the treatment effect of dollarization on trade while explicitly controlling for self-selection of policy adoption. Employing a variety of propensity score matching methods, we show that dollarization not only increases bilateral US trade with dollarized countries, but promotes a dollarizer’s bilateral trade with other dollar-zone countries as well.     

利率市场化能降低企业营运风险吗?——基于融资约束和企业金融化的双重视角

如何提高金融服务实体经济的结构性调节功能并促进企业有序运营与健康发展是金融供给侧结构性改革的重要目标。利率市场化改革作为金融领域最重要的改革之一,其在微观层面如何影响实体经济运行引起了高度关注。本文首先从理论上诠释了利率市场化通过缓解融资约束、抑制金融化进而降低企业营运风险的逻辑关系。为识别利率市场化与企业营运风险之间的因果效应,本文以中国人民银行2004年10月取消金融机构贷款利率上限和2013年7月取消金融机构贷款利率下限为外生冲击,基于融资约束差异构造准自然实验为上述理论推断提供经验证据。特别地,利率市场化每增加1单位标准差,企业营运风险平均约下降样本标准差的2.39%。异质性分析表明,利率市场化对企业营运风险的抑制效应在融资约束程度较高、行业竞争程度较高、投资机会较多的企业中尤为明显。本文研究对于进一步优化资源配置效率、实现金融与实体经济高质量发展具有一定参考意义。     

货币供应量、利率与银行系统性金融风险——基于CoVaR方法的实证研究

在常态化疫情防控的背景下,商业银行系统性金融风险有上升迹象,这对央行实施货币政策工具和力度的把握提出了更高要求。本文利用条件在险值模型检验了我国货币供应量、利率与银行系统性金融风险的关系。研究结果表明,货币供应量和利率与银行系统性风险之间的关系不是线性的,而是U型的,即存在最优的货币供应量和利率能够使商业银行的系统性金融风险最低。当货币供应量和利率小于这个最优组合时,增加货币供应量和提高利率能够有效降低商业银行的系统性金融风险;而当货币供应量和利率大于这个最优组合时,增加货币供应量和提高利率反而会增加银行系统性金融风险,进而降低商业银行的金融稳定性。     

中国房地产企业间系统性风险溢出效应分析——基于尾部风险网络模型

本文以2007—2021年沪深A股上市房企为样本,首先基于SIM单指数分位数回归技术提出测量系统性风险的新指标SIM-CoVaR,并结合前沿的TENET网络模型,构造跨房地产企业风险动态传染的尾部风险网络,然后采用块模型探究房地产市场系统性风险溢出的聚类性、触发机制及传播路径,最后考察网络整体结构和宏观经济变量对房地产市场系统性风险溢出的影响。研究表明:(1)我国房地产企业间存在明显的系统性风险联动性和溢出效应,在市场动荡时期房地产部门是金融风险溢出的放大器;(2)评估系统重要性节点企业时,除考虑企业规模等内部属性,还应考虑房企间关联结构,利用系统性风险指数可有效捕捉网络中系统重要性节点;(3)跨房企的系统性风险溢出具有显著的聚类特征,尾部风险网络可被划分为4个不同的功能模块,各模块的成员及其角色呈现明显的时变特性,监管部门可据此从供给端“因企施策”;(4)网络聚集性、网络效率和网络匹配性的降低能显著降低房地产市场的系统性风险溢出效应。本文从企业微观层面探讨房地产市场风险的形成机制,为促进房地产业健康发展和防范化解宏观层面的系统性金融风险提供参考。     

Political Connections and Corporate Borrowing: an Analysis on the Listed Real Estate Firms in China

This paper investigates the relationship between political connections and corporate borrowing behaviour using the listed real estate development firms in China from 2001 to 2014. Evidence from China is of particular importance due to China being the world’s largest emerging and transition economy. We find that the benefit of political connections is manifested in firms obtaining loans from state-controlled banks in the first instance, but that political influence diminishes over subsequent loan extensions. The performance based requirement prevents banks providing systemic favourable treatment to the connected real estate firms, especially after the Chinese banking system reform in 2006. The results provide fresh insight on the risks and benefits of political connections in the Chinese real estate market as it transitions from a centrally planned to a market based economy under on-going market oriented banking and political reforms.     

国外保险企业风险预警的理论与实践及对中国的启示

有效的企业风险预警,能够降低企业破产成本、维护相关利益者权益、节约行政资源、防范系统性风险.保险作为"经济助推器"和"社会稳定器",肩负着为经济社会管理风险的特殊职能,保险业自身的安全,对整个经济社会的稳定具有特殊重要的作用,建立针对保险企业的风险预警机制已极为迫切.本文介绍了国外保险企业风险预警的理论和实践,希望能对...