Selected Results

The OeNB Euro Survey explores households’ assessment of the general economic sentiment, including e.g. the present and future economic situation, their own financial situation, expected exchange rate developments or the expected date of euro adoption in their home country. Furthermore, households are asked about their trust in currencies and institutions, including the local currency, the euro, the EU, the national government as well as banks, or the perceived safety of saving deposits.

One dimension of euroization is the distribution of foreign currency cash holdings. Little direct evidence is available for foreign currency cash holdings. The following chart shows that, first, the share of respondents holding foreign cash is substantial in some countries and varies considerably across countries. Second, the currency breakdown reveals the predominant role of the euro in all the countries analyzed.

Furthermore, the factors driving the use of the euro may be of interest. Do people use the euro because of past experience or expectations? Does the global financial crisis pose a threat to the people in the region with regard to the value of their savings? Have households reshuffled their portfolios in response to this threat? The 2009 fall wave of the survey for the first time since the onset of the crisis in the region clearly showed the real effects of the economic downturn on CESEE households. Among other things, the financial crisis has led to a substantial deterioration of people’s trust in banks. Our research on the determinants of the use of the euro suggests that households’ portfolio decisions are highly sensitive to the safety of deposits in Southeastern Europe. Hence the deterioration of trust induced a shift from saving deposits to (foreign currency) cash holdings. Surprisingly, the massive withdrawals of saving deposits in many Southeastern European countries in the fall of 2008 did not translate into an increase of per capita euro cash holdings in the 2009 spring wave, which raised the question about the possible whereabouts of the withdrawn money. Direct evidence derived from ad hoc questions in the 2009 fall wave of the OeNB Euro Survey confirm the hypothesis that people essentially used the money they withdrew to cover their current expenses. Consequently, the distribution of euro cash holdings has declined in all countries surveyed compared to pre-crisis levels.

Another dimension of euroization concerns the reasons why people hold foreign currency-denominated assets. They may use them as a store of value or they may use foreign currency as a unit of account and medium of exchange. In the countries of Southeastern Europe, people tend to agree to the statement that they hold euro cash as a general reserve or a means of precaution. By contrast, in Central and Eastern Europe, the most important reason to hold euro cash is paying for holidays and shopping abroad.

The OeNB Euro Survey also sheds some light on the liability side of households’ portfolios. While, in principle, information on the level of foreign currency loans is available from aggregate statistics, the OeNB Euro Survey results provide valuable additional information. First, the survey data allow conclusions to be drawn about the distribution of foreign currency loans among the population, also by socio-demographic groups. Second, they provide information on the motives for taking out such loans, thus complementing the economic literature on the determinants of credit euroization. Third, the survey results provide the basis for future research dedicated to assessing how foreign currency loans are related to saving deposits.

The OeNB Euro Survey includes questions about whether respondents plan to take out a foreign currency loan within the next year, which gives an indication about the possible future development of foreign currency lending. In the course of the financial crisis, the number of persons that planned to take out foreign currency loans declined in seven out of nine countries surveyed. This means that the crisis may have made households more aware of the exchange rate risk associated with foreign currency loans. As a consequence, appetite for foreign currency loans might be expected to decline in the coming years, which would go hand in hand with recent regulatory efforts. However, the most recent data suggest that demand for foreign currency loans has not disappeared altogether. In some countries, it seems to have dropped but remained stable at a lower level, in other countries it even seems to recover after the temporary decline caused by the financial crisis.