Download or read book Hysteresis in a Simple Model of Currency Substitution written by Martín Uribe and published by . This book was released on 1995 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Hysteresis of Currency Substitution written by Neven T. Valev and published by . This book was released on 2007 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: It is widely documented that currency substitution (using foreign money in transactions) increases in periods of high inflation but does not decline once inflation is reduced. The paper uses survey data from Bulgaria, which experienced this phenomenon, to investigate the origins of this ratchet effect. We find that expected devaluation of the domestic currency, while relatively high, does not play a major role in sustaining the dollarization of transactions. Conversely, preferences for the use of foreign money are strongly influenced by people's perception that foreign money is already widely used in the economy.

Download or read book Currency Substitution in Developing Countries written by Mr.Guillermo Calvo and published by International Monetary Fund. This book was released on 1992-05-01 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reviews the main policy and analytical issues related to currency substitution in developing countries. The paper discusses, first, whether currency substitution should be encouraged or not; second, how the presence of currency substitution affects the choice of nominal anchors in inflation stabilization programs; third, the effects of changes in the rate of growth of the money supply on the real exchange rate; fourth, the interaction between inflationary finance and currency substitution; and, finally, issues related to the empirical verification of the currency substitution hypothesis.

Download or read book Network Externalities and Dollarization Hysteresis written by Nienke Oomes and published by International Monetary Fund. This book was released on 2003-05-01 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: Dollarization in Russia increased rapidly during the early 1990s, but failed to come down in the second half of the 1990s in spite of exchange rate stabilization. To explain this "dollarization hysteresis," this paper develops a model in which network externalities in the demand for currency can generate multiple stable steady states for the dollarization ratio. The model is estimated using a new source of data on dollar currency holdings in Russia. On the basis of these estimates, which confirm the existence of network externalities, the paper discusses several policies that could result in a permanent decrease in dollarization.

Download or read book Dollarization in Transition Economies written by Ms.Ratna Sahay and published by International Monetary Fund. This book was released on 1995-09-01 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: After most restrictions on foreign currency holdings were relaxed in the early 1990s, foreign currency deposits in transition economies have been increasing rapidly. This paper takes a first look at the evidence on dollarization for 15 transition economies, and then discusses some key conceptual and policy implications. Depending on the institutional constraints, foreign currency deposits as a proportion of broad money reached a peak of between 30 and 60 percent in 1992-93. Unlike what has been observed in Latin America, however, dollarization has fallen substantially in the aftermath of successful stabilization plans in Estonia, Lithuania, Mongolia, and Poland. Since foreign currency deposits reflect mainly a portfolio choice, the fall in dollarization can be primarily attributed to higher real returns on domestic-currency assets, as a result of lower inflation and more market-determined interest rates.

Download or read book A Non linear Currency Substitution Model of Monetary Policy Conflict Post War Reconstruction and Hysteresis in Debt and Competitiveness written by Saziye Gazioglu and published by . This book was released on 1996 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Currency Substitution and Network Externalities written by Paul Reding and published by . This book was released on 2004 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: It is a known fact that the use of foreign currency by domestic residents shows significance persistence, even hysteresis. Temporary changes in the inflation rate can have permanent effects on the degree of currency substitution, as illustrated by the case of Bolivia, where dollarization has remained at a particularly high level after stabilization. The paper presents a simple model of currency substitution with network effects among agents with heterogeneous transaction costs. A network of foreign currency users reduces transactions costs for all prospective users of this currency. The strength of the network effects increases with size, which is defined as the number of agents whose foreign currency balances are larger than a given threshold. The network's size is endogenously determined. Its dynamics and the possibility of multiple equilibria generate patterns of currency substitution which exhibit persistence and hysteresis.

Download or read book A Non Linear Currency Substitution Model of Hysteresis in Debt and Competitiveness written by Saziye Gazioglu and published by . This book was released on 2006 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: The model has four assets: domestic and foreign money and bonds. It is a two country macro model, with debt defined in terms of the net asset holdings of the domestic country. Asset flows between the domestic and foreign country are driven by the interaction between the current and capital account. Both the assets and goods markets are non-linear: the non-linearities in international debt create the possibility of multiple debt and competitiveness equilibria. The paper shows that domestic and foreign monetary policy, as well as trade shocks, can not only lead to irreversibility of international debt, but also of international competitiveness. This allows us to shed some light on the causes leading to 'debt traps' faced by newly industrialised and less developed countries, the so called 'Dutch disease' in countries with new resource discoveries, and the persistent effects on trade and competitiveness with capital controls and project linked lending.

Download or read book Dollarization of Financial Intermediation written by Mr.Alain Ize and published by International Monetary Fund. This book was released on 1998-03-01 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a portfolio model of financial intermediation in which currency choice is determined by hedging decisions on both sides of a bank’s balance sheet. Minimum variance portfolio (MVP) allocations are found to provide a natural benchmark to estimate the scope for dollarization of bank deposits and loans as a function of macroeconomic uncertainty. Dollarization hysteresis is shown to occur when the expected volatility of the inflation rate is high in relation to that of the real exchange rate. The evidence shows that MVP dollarization generally approximates actual dollarization closely for a broad sample of countries, and policy implications are explored.

Download or read book Currency Substitution and the Moneyness of Monetary Assets written by Eduardo A. Morón and published by . This book was released on 1998 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The previous literature on dollarization processes has two basic problems. First is the poor empirical methods of measurement, and second is the lack of a clear definition of the phenomenon under study. Several methodological problems have not been successfully addressed. Foreign currency holdings cannot be measured directly, and the dollarization ratios are very imprecise as they do not take into account institutional considerations. We present a simple model in which monetary assets are held for two motives: transactions and a store of wealth. Based on the Divisia literature, the model emphasizes the difference in liquidity properties in different monetary assets. In a dollarized economy, this notion is particularly important as we can distinguish two separate phenomena: currency substitution and asset substitution. The first one is measured as the share of total liquidity obtained from dollar- denominated assets. The second one is not related to transactions and, therefore, is just the share of total financial assets that is held in dollar-denominated assets. The model predicts a close relationship between asset substitution and the interest rate differential and between currency substitution and the inflation rate differential. Using the Peruvian dollarization experience (1978-1996), we found significant evidence supporting these hypotheses. Furthermore, we reject the presence of hysteresis as the corrected currency substitution ratios are cointegrated with the inflation differential rate.

Download or read book Dollarization in Latin America written by Miguel A. Savastano and published by International Monetary Fund. This book was released on 1996 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the pattern of dollarization in Latin America, focusing on the experience of five countries (Argentina, Bolivia, Mexico, Peru and Uruguay) during 1970-1993. It presents evidence on the relative size of dollarization, the allocation of foreign currency deposits, and the behavior of money velocity. The discussion stresses the role of institutional factors, macroeconomic conditions, and the dynamics of money demand In shaping the dollarization process; it also highlights the shortcomings of indicators frequently employed to analyze the phenomenon. The paper provides a brief critical assessment of the empirical literature on dollarization, and identifies areas where further research seems warranted.

Download or read book Dollarization Hysteresis and the Role of Network Externalities written by Bettina M. Peiers and published by . This book was released on 1995 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Unravelling The Persistence of Dollarization written by Ia Eradze and published by Taylor & Francis. This book was released on 2023-06-22 with total page 232 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume engages with the roots, dimensions, and implications of foreign currency domination in states with a national currency. Referred to as unofficial dollarization in literature, this is a worldwide phenomenon among developing countries and has a long history. This monograph provides a political economic analysis of dollarization in Georgia and is structured around three themes: the genesis of dollarization (1991–2003), the persistence of dollarization (2003–12) and the politicization of dollarization (2012–19). The case of Georgia is especially representative of the post-socialist transition states, but also has wider applicability. A high level of dollarization is a significant barrier to economic growth, macroeconomic and political stability, functional monetary policy, as well as social welfare. The Covid-19 crisis and the increasing debt of developing countries in foreign currency exacerbate dollarization-related vulnerabilities for these economies. This book will be of interest to postgraduate students in global/comparative political economy, development economics or transition economies, researchers in monetary sovereignty, central banking, exchange rate policies, currency hierarchy, money, financialization, and policy makers in dollarized countries and global institutions.

Download or read book Currency Substitution and Vehicle Currencies written by Stephen H. Thomas and published by . This book was released on 1991 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Currency Substitution in Russia 1991 1999 written by Ashok Bardhan and published by . This book was released on 2001 with total page 316 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Exchange Rate Economics written by Ronald MacDonald and published by Routledge. This book was released on 2005 with total page 334 pages. Available in PDF, EPUB and Kindle. Book excerpt: ''In summary, the book is valuable as a textbook both at the advanced undergraduate level and at the graduate level. It is also very useful for the economist who wants to be brought up-to-date on theoretical and empirical research on exchange rate behaviour.'' ""Journal of International Economics""

Download or read book Inflation Targeting and Exchange Rate Management In Less Developed Countries written by Mr.Marco Airaudo and published by International Monetary Fund. This book was released on 2016-03-08 with total page 65 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze coordination of monetary and exchange rate policy in a two-sector model of a small open economy featuring imperfect substitution between domestic and foreign financial assets. Our central finding is that management of the exchange rate greatly enhances the efficacy of inflation targeting. In a flexible exchange rate system, inflation targeting incurs a high risk of indeterminacy where macroeconomic fluctuations can be driven by self-fulfilling expectations. Moreover, small inflation shocks may escalate into much larger increases in inflation ex post. Both problems disappear when the central bank leans heavily against the wind in a managed float.