Research policy notes (RPN 1-15) : dollarization in the Maldives

Abstract

This paper aims to evaluate the degree of dollarization in the Maldivian economy. Utilizing three measures identified from the literature on the subject, dollarization ratios have been constructed to assess the degrees of deposit and credit dollarization, prevalent in the local economy. To this end, data on the currency composition of deposits held at and credit extended by the commercial banks in the Maldives from 1990 to November 2015 (obtained from the Maldives Monetary Authority), have been scrutinised to study dollarization trends over the 25 year period. Further, the paper will explore the causes and reasons for the high degree of dollarization, and posit explanations for the identified trends.