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Hard currency and financial development

Author

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  • Ilan Goldfajn

    (Department of Economics PUC-Rio)

  • Roberto Rigobon

Abstract

This paper investigates the relationship between hard currency and financial development. It creates four different series of hard currency based on different sets of data. The results of the paper suggest that indeed financial development and the hardness of currencies are highly correlated. However, we find that the relationship from currency hardness to financial development is fully captured by macro variables that represent overall macroeconomic stability. This suggest that having a hard currency is not a pre-condition for financial development but rather establishing a macroeconomic stable environment.

Suggested Citation

  • Ilan Goldfajn & Roberto Rigobon, 2000. "Hard currency and financial development," Textos para discussão 438, Department of Economics PUC-Rio (Brazil).
    • Handle: RePEc:rio:texdis:438
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    References listed on IDEAS

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    Cited by:

    1. Honohan, Patrick & Shi, Anging, 2001. "Deposit dollarization and the financial sector in emerging economies," Policy Research Working Paper Series 2748, The World Bank.
    2. Fatih Ozatay & Guven Sak, 2003. "Banking Sector Fragility and Turkey�s 2000�01 Financial Crisis," Working Papers 0308, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.

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