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Determinants of Deposit and Credit Euroization in Eastern Europe: A Bayesian Model Averaging Evidence

Author

Listed:
  • Petr Vanek

    (Department of Finance, Faculty of Business and Economics, Mendel University in Brno)

  • Petr Korab

    (Department of Finance, Faculty of Business and Economics, Mendel University in Brno)

Abstract

The paper investigates the motives of deposit and credit euroisation in Eastern Europe employing Bayesian empirical methodology. We analyse a unique dataset of macroeconomic fundamentals, perception surveys, and institutional quality indicators and deal with the uncertainty in the model by Bayesian model averaging. Apart from traditional fundamental factors, strong institutions are found to be an important driver of both credit and deposit euroisation. Business regulation, corruption environment, administrative costs and country-specific risk impact borrowing and saving behaviour in EURO and should be reflected in designing de-euroisation policies in the region.

Suggested Citation

  • Petr Vanek & Petr Korab, 2018. "Determinants of Deposit and Credit Euroization in Eastern Europe: A Bayesian Model Averaging Evidence," MENDELU Working Papers in Business and Economics 2018-73, Mendel University in Brno, Faculty of Business and Economics.
    • Handle: RePEc:men:wpaper:73_2018
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    References listed on IDEAS

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    Cited by:

    1. Nilgun Caglarirmak Uslu & Sevcan Kapkara, 2019. "The Determinants of Credit Dolarization: Turkish Case," Economics Literature, WERI-World Economic Research Institute, vol. 1(2), pages 148-167, December.

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    More about this item

    Keywords

    Euroization; Bayesian model averaging; currency substitution; foreign currency borrowing; institutional quality;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • P24 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - National Income, Product, and Expenditure; Money; Inflation

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