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Cultural and Financial Dollarization of Households in Uruguay

Author

Listed:
  • Gerardo Licandro

    (Banco Central del Uruguay)

  • Miguel Mello

    (Banco Central del Uruguay)

Abstract

In this paper, we analyze factors associated with the financial and cultural dollarization of households in Uruguay. We estimate cultural dollarization with data from the 2013 financial survey of Uruguayan households, particularly using the currency reporting option available to respondents. Financial dollarization, meanwhile, is estimated as the share of US dollar-denominated bank assets in total assets. We find that the level of dollarization of bank savings is mainly explained by the size of savings and household wealth. We also observe that our proxy variable for cultural dollarization is associated with wealth and home ownership. Other factors that influence cultural dollarization are age and years of formal education, which are positively and significantly correlated with the use of the US dollar as a unit of account and asset valuation. Larger households, on the other hand, are less culturally dollarized. The evidence points to the key role played by the pricing system in the dollarization culture.

Suggested Citation

  • Gerardo Licandro & Miguel Mello, 2017. "Cultural and Financial Dollarization of Households in Uruguay," Documentos de trabajo 2017009, Banco Central del Uruguay.
    • Handle: RePEc:bku:doctra:2017009
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    References listed on IDEAS

    as
    1. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    2. Julio De Brun & Gerardo Licandro, 2005. "To hell and back. Crisis management in a dollarized economy: the case of Uruguay," Documentos de trabajo 2005004, Banco Central del Uruguay, revised 29 Sep 2005.
    3. Bohn, Henning, 1990. "Tax Smoothing with Financial Instruments," American Economic Review, American Economic Association, vol. 80(5), pages 1217-1230, December.
    4. Gerardo Licandro & Miguel Mello, 2012. "Canal de hojas de balance en Uruguay: ¿Acelerador financiero, freno o ambos?," Documentos de trabajo 2012015, Banco Central del Uruguay.
    5. Rousseau, Peter L. & Wachtel, Paul, 2002. "Inflation thresholds and the finance-growth nexus," Journal of International Money and Finance, Elsevier, vol. 21(6), pages 777-793, November.
    6. Gerardo Licandro & José Antonio Licandro, 2003. "Building the Dedollarization Agenda: Lessons from the Uruguayan Case," Money Affairs, CEMLA, vol. 0(2), pages 193-218, July-Dece.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. María Victoria Landaberry & Miguel Mello, 2019. "Inherited Dollarization: Persistence of US Dollar Pricing in Consumer Goods Markets," Documentos de trabajo 2019005, Banco Central del Uruguay.
    2. Nicoleta Bărbuță-Mișu & Tuna Can Güleç & Selim Duramaz & Florina Oana Virlanuta, 2020. "Determinants of Dollarization of Savings in the Turkish Economy," Sustainability, MDPI, vol. 12(15), pages 1-16, July.

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    More about this item

    Keywords

    dollarization; financial decisions; households; indebtedness; saving;
    All these keywords.

    JEL classification:

    • E - Macroeconomics and Monetary Economics
    • D1 - Microeconomics - - Household Behavior
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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