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Addressing private sector currency mismatches in emerging Europe

Author

Listed:
  • Jeromin Zettelmeyer

    (EBRD)

  • Piroska M. Nagy

    (EBRD)

  • Stephen Jeffrey

    (University of Warwick)

Abstract

This paper provides a survey of the theoretical and empirical literature on the dollarisation of corporate and household liabilities; presents evidence on the causes of FX lending specifically in transition economies; and proposes a set of criteria to help decide on the right policy response based on country characteristics. These criteria particularly affect the extent to which regulation should be part of the policy response. Regulation to contain FX mismatches is useful in relatively advanced countries in which small market size and/or proximity to the euro make it difficult to fully develop local currency capital markets. In contrast, regulatory responses could be counterproductive in less advanced countries with high macroeconomic volatility. In these countries, the route to de-dollarisation first and foremost requires the strengthening of macroeconomic institutions.

Suggested Citation

  • Jeromin Zettelmeyer & Piroska M. Nagy & Stephen Jeffrey, 2010. "Addressing private sector currency mismatches in emerging Europe," Working Papers 115, European Bank for Reconstruction and Development, Office of the Chief Economist.
    • Handle: RePEc:ebd:wpaper:115
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    More about this item

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies
    • P5 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems

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