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Deposit dollarization in emerging markets: modelling the hysteresis effect

Author

Listed:
  • Anna Krupkina

    (Bank of Russia
    NRU-HSE)

  • Alexey Ponomarenko

    (Bank of Russia)

Abstract

We estimate a nonlinear relationship that determines two equilibrium levels of deposit dollarization depending on the current value of dollarization and previous episodes of sharp depreciation of the national currency over the past five years. If exchange rate is stable, convergence to a higher equilibrium level of dollarization begins when the 45–50 % threshold of deposit dollarization is exceeded. We estimate the model for short-run dynamics of dollarization and find that the speed of convergence to the higher equilibrium implies quarterly increases of 1.2 to 3 percentage points in the ratio of foreign currency deposits to total deposits.

Suggested Citation

  • Anna Krupkina & Alexey Ponomarenko, 2017. "Deposit dollarization in emerging markets: modelling the hysteresis effect," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 41(4), pages 794-805, October.
    • Handle: RePEc:spr:jecfin:v:41:y:2017:i:4:d:10.1007_s12197-016-9379-1
    DOI: 10.1007/s12197-016-9379-1
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    Cited by:

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    4. Anna Krupkina & Alexey Ponomarenko, 2017. "Deposit dollarization in emerging markets: modelling the hysteresis effect," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 41(4), pages 794-805, October.
    5. Alexey Ponomarenko & Anna Krupkina, 2016. "Deposit dollarization and national currency depreciation in Russia and Kazakhstan," Bank of Russia Working Paper Series note1, Bank of Russia.

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    More about this item

    Keywords

    Dollarization; Hysteresis; Emerging markets;
    All these keywords.

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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