Dollarization Phenomenon: A Theoretical Investigation and the Case of Turkey

The aim of this study is to give introductory information about the concept of dollarization in order to explain dollarization process experienced in Turkey in 1990’s and additionally is to draw attention to the unofficial dollarization trend started to rise again in last few years. Especially since 1990s, the interest in dollarization has increased with the crises emerged in world economies. Beside the economic losses caused from dollarization, there are also beneficial effects. As a result, some countries have consciously switched to official dollarization, while some countries spontaneously start to live an informal dollarization process. Especially the inflation that accompanies the crises creates dollarization and there are also other causes. In the 1990s a serious unofficial dollarization process in Turkey has experienced. Later, due to the relatively stable atmosphere and the slowdown in inflation, the process of dollarization began to reverse. But the fact that the share of foreign exchange deposits in total deposits has started to rise again in the last few years points to the increase in the informal dollarization. Due to the structure of the Turkish economy which is an emerging country this risk is always present