Credit Dollarization occurs when firms borrow in foreign currency (‘dollars’) and Deposit Dollarization occurs when households save in dollars. This research is placed in the context of two themes: Dollarization as a source of international risk sharing, and dollarization as a source of financial fragility.
This research explores the following questions:
- is financial dollarization used as intra-national insurance?
- how different are intra-national and inter-national flows?
- how do frequency of banking crises, severity of banking crises and large balance sheets impact dollarization?