Regional Inflation, Financial Integration and Dollarization
Forthcoming, Review of Finance
63 Pages Posted: 10 Dec 2013 Last revised: 1 Apr 2017
Date Written: March 31, 2017
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 household deposits and a decrease in the dollarization of loans to households and to firms in non-tradable sectors. The impact of inflation on credit dollarization is weaker in regions with less integrated banking markets. This suggests that the currency-portfolio choices of households and firms may be constrained by the asset-liability management of banks..
Keywords: Financial dollarization, financial integration, regional inflation
JEL Classification: E31, E42, E44, F36, G21, P22, P24
Suggested Citation: Suggested Citation