CEU Electronic Theses and Dissertations, 2019
| Author | Siradze, Tamar |
|---|---|
| Title | In Dollar We Trust: What Drives Financial Dollarization in Georgia? |
| Summary | This thesis examines the main determinants of financial dollarization in Georgia from 1996 to 2018 and studies why the idea “in dollar we trust” is very strong in the Georgian population. I use the methodology proposed by Levy Yeyati (2005), where I analyze the key drivers of financial dollarization in the portfolio, market failure, and substitution views framework. Using Ordinary Least Squares regression model, I regress the deposit dollarization ratio on a set of explanatory variables to capture the main determinants. The empirical results support the portfolio view and reveal that high financial dollarization is driven by demand-side factors. In particular, the data indicates that the influence of average past inflation increases people’s doubts towards the Georgian Lari and its economy. Thus, the stability of macroeconomic institutions is a crucial point for further economic development, which will increase the trust in the Georgian economy. The thesis further suggests the relevant policy recommendations addressing the high financial dollarization in Georgia. |
| Supervisor | Julius Horváth |
| Department | Economics MA |
| Full text | https://www.etd.ceu.edu/2019/siradze_tamar.pdf |
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