Abstract:

The phenomenon of dollarization is a process that needs to be carefully examined, especially for developing economies. The accurate determination of the determinants and effects of this process is crucial for mitigating its negative outcomes. In this context, the study employs a two-way research model. In the first stage, the impact of inflation and changes in the value of the national currency on the financial dollarization process in Turkey is investigated. For this examination, an ARDL model is established between the consumer price index, real effective exchange rate, and the subcomponents of financial dollarization, namely deposit dollarization and credit dollarization. In the second stage, the relationship between financial dollarization and BIST Industrial and BIST Bank indices is explored using the Toda-Yamamoto method. The research is conducted using a monthly dataset comprising 120 observations from July 2013 to June 2023. The study reveals a long-term cointegrating relationship between the consumer price index, real effective exchange rate, and deposit dollarization, with a negative direction. Furthermore, Granger causality from financial dollarization to the BIST Industrial index is identified. These findings not only clarify the impact of factors considered determinants of the dollarization process but also provide evidence that investing in industrial companies, particularly during dollarization periods, could be a significant alternative for savers.

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