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Are Euro Cash Holdings in Central and Eastern Europe Driven by Experience or Anticipation? Results from an OeNB Survey

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Abstract

Although euroization is an important phenomenon in emerging markets, still very little is known about who holds how much euro and for what purposes. In this paper, we employ unique survey data to analyze various aspects of foreign currency holdings in five Central and Eastern European countries (CEECs). This allows us to study the impact of expectations and hysteresis on individual behavior. Our results show that a substantial share of the population in the countries under review holds euro cash. We fi nd little evidence that infl ation or exchange rate expectations are important determinants of euroization, whereas variables related to a country’s economic history seem to be of some signifi cance. Our results also indicate that the demand for euro and its use in domestic payments increases as the date of euro adoption approaches.

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File URL: http://www.oenb.at/dms/oenb/Publikationen/Volkswirtschaft/Focus-on-European-Economic-Integration/2007/Focus-on-European-Economic-Integration-Q1-07/chapters/feei_2007_1_ritzberger_stix_tcm16-58437.pdf
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Article provided by Oesterreichische Nationalbank (Austrian Central Bank) in its journal Focus on European Economic Integration.

Volume (Year): (2007)
Issue (Month): 1 ()
Pages: 77-100

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Handle: RePEc:onb:oenbfi:y:2007:i:1:b:2

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  1. Feige,E.L., 2003. "The dynamics of currency substitution, asset substitution and de facto dollarization and euroization in transition countries," Working papers 3, Wisconsin Madison - Social Systems.
  2. Helmut Stix, 2004. "Foreign Currency Demand since 2002 - Evidence from Five Central and Eastern European Countries," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 5(4), pages 19-24, December.
  3. Helmut Stix, 2002. "The Euro in Central and Eastern Europe (CEE countries) : survey evidence from five countries," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 3(3), pages 33-38, 04.
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Cited by:
  1. Helmut Stix, 2008. "Euroization: What Factors drive its Persistence?," Working Papers 140, Oesterreichische Nationalbank (Austrian Central Bank).
  2. Isakova, Asel, 2010. "Currency substitution in the economies of Central Asia: How much does it cost?," BOFIT Discussion Papers 14/2010, Bank of Finland, Institute for Economies in Transition.
  3. Doris Ritzberger-Grünwald & Thomas Scheiber, 2012. "Euro Cash in Central, Eastern and Southeastern Europe," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 41–55.
  4. Thomas Scheiber & Helmut Stix, 2009. "Euroization in Central, Eastern and Southeastern Europe – New Evidence On Its Extent and Some Evidence On Its Causes," Working Papers 159, Oesterreichische Nationalbank (Austrian Central Bank).

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