THE ROLE OF FINANCIAL DOLLARIZATION DURING THE FINANCIAL CRISES
Abstract
This paper explores the relationship between financial dollarization and financial crises. The unhedged foreign currency borrowing and foreign currency depreciations are often seen as a major threat to financial stability, especially in CEE countries where the credit and deposit dollrization is high. The paper consists of four parts. The first part deals with the determinants of financial dollarization. The second part analyses the dimensions of financial dollrization in Emerging Europe. The third part discusses the role of financial dollarization during several financial crises (Mexico, East Asia, Argentina, recent global financial crisis). The fourth part focuses on potential risks emerging from financial dollarization in Republic of Macedonia, under different scenarios for devaluation of national currency.References
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