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Zero Interest Rate for the US Dollar Deposit and Dollarization: The Case of Vietnam

  • Pham Thi Hoang AnhEmail author
Conference paper
Part of the Studies in Computational Intelligence book series (SCI, volume 760)

Abstract

The paper’s objective is to assess the impact of the ceiling and zero interest rate for US dollar deposits on dollarization index and, more generally, to find factors affecting dollarization in Vietnam. By employing the VAR model with six variables, the paper found empirical evidence that the ceiling on the interest rate for US dollar deposits and the interest rate differentials are important factors affecting deposit dollarization in Vietnam. These results are in agreement with the fact that after the ceiling rate for US dollar deposits was decreased from three percent to zero while maintaining a positive interest rate differential, the deposit dollarization ratio decreased significantly. Inflation, parallel market premium, and international reserves are also found to be important determinants of dollarization status in Vietnam.

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Copyright information

© Springer International Publishing AG 2018

Authors and Affiliations

  1. 1.Banking Research InstituteBanking Academy of VietnamHanoiVietnam
  2. 2.The State Bank of VietnamHanoiVietnam

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