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Currency Substitution in Egypt and the Yemen Arab Republic: A Comparative Quantitative Analysis

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  • Mohamed El-Erian

    (International Monetary Fund)

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    Abstract

    An empirical analysis of the determinants of currency substitution in Egypt and the Yemen Arab Republic is provided for the period 1980-86. During this period, residents exhibited a marked preference to substitute foreign money balances for domestic balances, as indicated by their holdings of foreign currency deposits. This preference reflects changes in the expected relative returns to, and liquidity of, holdings of foreign balances. Such changes, in turn, are shown to result from intensified financial and economic imbalances, increased political uncertainties, and changes in institutional factors that affect domestic channels for acquiring and using foreign exchange resources.

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    Bibliographic Info

    Article provided by Palgrave Macmillan in its journal Staff Papers - International Monetary Fund.

    Volume (Year): 35 (1988)
    Issue (Month): 1 (March)
    Pages: 85-103

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    Handle: RePEc:pal:imfstp:v:35:y:1988:i:1:p:85-103

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    Cited by:
    1. Alami, Tarik H., 2001. "Currency substitution versus dollarization: A portfolio balance model," Journal of Policy Modeling, Elsevier, vol. 23(4), pages 473-479, May.
    2. David Fielding & Anja Shortland, 2005. "How does political violence affect confidence in a local currency? Evidence from Egypt," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(7), pages 841-866.
    3. Sahay, Ratna & Vegh, Carlos, 1995. "Dollarization in transition economies: Evidence and policy implications," MPRA Paper 20490, University Library of Munich, Germany.
    4. Agenor, Pierre-Richard & Khan, Mohsin S., 1996. "Foreign currency deposits and the demand for money in developing countries," Journal of Development Economics, Elsevier, vol. 50(1), pages 101-118, June.
    5. Georgy Idrisov & Lev Freinkman, 2009. "Modeling the Currency Structure of Bank Deposits: Does the Ratchet Effect Matter?," Working Papers 0005, Gaidar Institute for Economic Policy, revised 2009.
    6. Miguel Lebre de Freitas, 2003. "Revisiting Dollarisation Hysteresis: Evidence from Bolivia, Turkey and Indonesia," NIPE Working Papers 12/2003, NIPE - Universidade do Minho.
    7. Kem Reat Viseth, 2001. "Currency Substitution and Financial Sector Developments in Cambodia," International and Development Economics Working Papers idec01-4, International and Development Economics.
    8. Calvo, Guillermo & Vegh, Carlos, 1992. "Currency Substitution in Developing Countries: An Introduction," MPRA Paper 20338, University Library of Munich, Germany.
    9. Adeniji, Sesan, 2013. "Investigating the Relationship between Currency Substitution, Exchange Rate and Inflation in Nigeria: An Autoregressive Distributed Lag (ARDL) Approach," MPRA Paper 52551, University Library of Munich, Germany, revised 28 Dec 2013.
    10. Alberto Giovannini & Bart Turtelboom, 1992. "Currency Substitution," NBER Working Papers 4232, National Bureau of Economic Research, Inc.
    11. Adenutsi, Deodat E. & Yartey, Charles A., 2007. "Financial sector development and the macrodynamics of ‘de facto’ dollarisation in developing countries: the case of Ghana," MPRA Paper 29333, University Library of Munich, Germany.

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