The mechanics of bank lending to resident borrowers in foreign currency in order to buy properties for domestic currency is given. It is shown that a bank may open a virtual position in a foreign currency, even not having the foreign currency in its vaults. Herewith, virtual cash flows and...

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...

We exploit variation in consumer price inflation across 71 Russian regions to examine the relationship between the perceived stability of the domestic currency and financial dollarization. Our results show that regions with higher inflation experience an increase in the dollarization of...

We analyze the differential impact of domestic and foreign monetary policy on the local supply of bank credit in domestic and foreign currencies. We analyze a novel, supervisory dataset from Hungary that records all bank lending to firms including its currency denomination. Accounting for...

We analyze the differential impact of domestic and foreign monetary policy on the local supply of bank credit in domestic and foreign currencies. We analyze a novel, supervisory dataset from Hungary that records all bank lending to firms including its currency denomination. Accounting for...

We use household survey data from Hungary to analyse the determinants of foreign currency (FX) borrowing. We do not find evidence that Hungarian FX borrowers are better educated, wealthier or more risk-loving than their peers. In fact, FX borrowing is a common phenomenon driven mostly by...

Dollar-denominated deposits constitute a large proportion of deposits in many developing economies. This may result in currency mismatches on banks' balance sheets as is suggested by recent literature. In general, having dollar-denominated deposits and loans could increase financial fragility,...

This paper investigates whether, and if so why, the recent ‘Great Recession' was more severe in unofficially dollarised/euroised economies than in other economies. To that end, the paper builds on a novel dataset on unofficial dollarisation/euroisation to test whether the latter was a...

In this paper we study dollarization as a commitment device that the Central Bank could use to avoid getting involved in an undesirable banking-sector bailout. We show how a political process could induce an equilibrium outcome that differs from the one that a benevolent Central Bank would want...

Some emergent economies present a high financial dollarization both in loans and deposits. This generates a specific risk in the banking activity. The exchange credit risk is defined as the expected loss resulting of a loan in foreign currency taken by an agent who receives its income in local...