The Dynamics of Deposit Euroization in European Post-transition Countries: Evidence from Threshold VAR
Year: 2012 Volume: 62 Issue: 3 Pages: 278-296
Abstract: This paper investigates the determinants and dynamics of deposit euroization (DE) in twelve European post-transition economies using threshold models. The results suggest that exchange rates and interest rate differentials are important for explaining DE. The results for the two countries with the highest macroeconomic and institutional credibility and flexible exchange rate regimes, the Czech Republic and Poland, suggest no evidence of threshold effects, while for other countries threshold behavior was found. The threshold VAR results indicate that depreciations have a stronger effect on DE than appreciations, while interest rate spreads widen more after home currency depreciations than after appreciations. Moreover, we found evidence that DE changes more strongly after interest rate differentials increase than after they decrease.
JEL classification: C32; E44; E58; F31; F41
Keywords: deposit euroization, exchange rate, transition, threshold
RePEc: http://ideas.repec.org/a/fau/fauart/v62y2012i3p278-296.html
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