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An empirical behavioral model of households’ deposit dollarization

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  • Ramis Khabibullin

    (Bank of Russia, Russian Federation)

  • Alexey Ponomarenko

    (Bank of Russia, Russian Federation)

Abstract

We use the behavioral concept to endogenously model the evolution of the link between households’ deposit dollarization and exchange rate developments in Russia. We estimate the model empirically and show that the reaction of households to exchange rate appreciation weakens when exchange rate developments become more volatile. The proposed model outperforms the contemporary nonlinear time series models in forecasting the changes in dollarization during the Bank of Russia’s transition to a flexible exchange rate regime.

Suggested Citation

  • Ramis Khabibullin & Alexey Ponomarenko, 2020. "An empirical behavioral model of households’ deposit dollarization," Bank of Russia Working Paper Series wps67, Bank of Russia.
    • Handle: RePEc:bkr:wpaper:wps67
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    Cited by:

    1. Konstantin Egorov & Alexey Ponomarenko, 2021. "Review of the Bank of Russia and NES Seminar ‘Financial Dollarisation: Causes and Consequences’," Russian Journal of Money and Finance, Bank of Russia, vol. 80(2), pages 96-104, June.

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    More about this item

    Keywords

    Dollarization; behavioral finance; variational Bayes; Russia;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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