Financial dollarization in Russia : causes and consequences

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Title: Financial dollarization in Russia : causes and consequences
Author: Ponomarenko, Alexey ; Solovyeva, Alexandra ; Vasilieva, Elena
Organization: Bank of Finland
Department / Unit: Institute for Economies in Transition (BOFIT)
Series: BOFIT Discussion Papers
Series number: 36/2011
Year of publication: 2011
Publication date: 30.12.2011
Published in: Published in Macroeconomics and Finance in Emerging Market Economies, Vol. 6, No. 2, 221–243 (2013)
Pages: 38
Keywords: valuuttasubstituutio; Venäjä; valuuttakurssit; luotot; talletukset; valuutat; Bofit-kokoelma
JEL: E44; F34; G32
Abstract: We review some aspects of financial dollarization in Russia, applying the main relevant theories to analyze the dynamics of several dollarization indicators. An econometric model of the short run dynamics of deposit and loan dollarization is estimated for the last decade. We find that ruble appreciation was the main driver of the de-dollarization that occurred then and of the later episode of renewed dollarization. We estimate the overall (and sector-al) currency mismatches of the Russian economy. The results show a gradual improvement of the net foreign currency position of the public sector, where we have seen significant accumulation of international reserves by the Bank of Russia and repayment of government debt. Evidence is also presented for the significant currency risk vulnerability of the nonbanking private sector. Several existing empirical studies are examined in order to assess the growth losses of the Russian economy following the crisis of 2008, which was linked with the financial dollarization. Keywords: Financial dollarization, currency mismatch, balance sheet effects, Russia. JEL classification: E44, F34, G32.

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