Determinants of Foreign Currency Savings: Evidence from Google Search Data

Abstract

This empirical study investigates the economic and psychological factors influencing the households’ saving preferences to savings currency focusing on the European Union (EU) countries outside the euro area with their own currencies. This paper focuses on basic macroeconomic shocks given by International Fisher Effect, capital account and remittances while a special attention is put on perception and sentiments of economic agents. The main contribution of the paper is based on the sentiment indicators received from Google search data. To estimate the model we applied Bayesian Model Averaging because we have not appropriate economic theory to select Google search keywords. The main findings of this empirical study suggest that foreign currency savings are not affected by earning motives but only by the risks related to depreciation of international remittances and perception of selected risks, e.g. political risks and economic activity.