Currency Substitution in Developing Countries: An Introduction (original) (raw)

Topics in the economics of money substitutes in developing and transition countries

2006

Recent research has shown that money substitutes - whether in the form of foreign currency or of more exotic instruments such as privately-issued moneys - are common in developing and transition countries, and have important consequences for macroeconomic and financial sector policy. The aim of this thesis is to advance our theoretical and empirical understanding of the determinants of money substitution in developing and transition economies. We begin in Chapter 1 by addressing the need for a general theoretical framework for the analysis of money substitutes. Reviewing both the classical and the modern theoretical literature on money, we conclude that the Credit theory of money - an ancient but until recently neglected theory which conceives of money as a unilateral financial contract between its issuer and its bearer - is a useful framework for such analysis. In Chapter 2, we undertake an empirical analysis of non-cash settlements (NCS) in Croatia. Using time series econometric...

Determinants of Currency Substitution in Southeast European Countries

Economic Themes, 2015

Currency substitution is widespread in less developed countries. Since it increases financial vulnerability and limits the effectiveness of monetary policy, it is often in the focus of scientists and experts. In this paper, we analyze the importance of euroization determinants in Serbia and neighboring countries - Albania, Bosnia and Herzegovina, FYR Macedonia, Romania and Croatia for the period 2003-2014. We examine the impact of domestic inflation, nominal exchange rate of the domestic currency against the euro, interest rate spread on domestic and foreign currency, foreign currency inflow in the form of foreign direct investments and exports, as well as the euroization of banks’financial resources on the degree of loan euroization. The results obtained by multiple regression panel methods confirm the statistical significance and assumed direction of the influence of all analyzed variables except inflation and current account balance.

Essays on exchange rate policy in developing countries

1999

The breakdown of the Bretton Woods system of pegged exchange rates has since 1971 given developing countries a wider range of choice with regard to their exchange rate regimes than had previously existed. With the emergence of a variety of exchange rate regimes, increasing attention has been given to the rationale for choosing one type of regime over another and how the variations in the nominal or real exchange rate affect the economies of these countries. This Ph.D. thesis is a combination of essays on exchange rate policy in developing countries along the lines of adoption of exchange rate regime and the determination of the nominal or real exchange rate variations. It attempts to investigate the following: (i) the role of `learning' in exchange rate regim adoption; (ii) the economic implications of adopting a monetary union in the Southern-Africa Development community (iii) the role of politics in determining exchange rate devaluation; and (iv) the problem of currency conver...

Currency Substitution: Evidence From Nigeria

This paper investigates whether currency depreciation in Nigeria has resulted in currency substitution away from the Nigerian Naira ₦ (NGN). By conducting cointegration test we have tested for a long-run relationship between M1, real income, nominal interest rate and nominal effective exchange rate over the period 1980 to 2013. Empirical results suggest that depreciation of the Naira has resulted in a decline in holding of M1 indicating the presence of currency substitution in Nigeria.