How to De-Dollarize Financial Systems in the Caucasus and Central Asia?
POLICY RECOMMENDATIONS
Empirical results in this paper indicate that the CCA and other regions of the world share a number of common drivers of dollarization. These include frequent depreciations and high volatility of exchange rates as drivers of FX deposits, while high inflation increases FX banks’ lending. Both FX deposits and loans show strong persistence, and weak financial systems exacerbate financial dollarization.
