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Currency substitution and seignorage in eastern europe

Author

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  • Bas Van Aarle
  • Nina Budina

Abstract

Economic and political uncertainty, high inflation and liberalization of foreign exchange restrictions have encouraged substantial currency substitution in the economies in transition. This paper presents empirical evidence on currency substitution in four Eastern European countries in transition: Poland, Hungary, Romania and Bulgaria. It is shown how currency substitution affects money demand and by that seignorage revenues. The empirical estimates of the money demand functions are used to calculate the seignorage maximizing rate of inflation in the economies in transition.

Suggested Citation

  • Bas Van Aarle & Nina Budina, 1996. "Currency substitution and seignorage in eastern europe," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 1(3), pages 279-298.
    • Handle: RePEc:taf:jpolrf:v:1:y:1996:i:3:p:279-298
    DOI: 10.1080/13841289608523365
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    Cited by:

    1. Kola Lendele & Joseph Kamanda Kimona-Mbinga, 2005. "Nature et spécificité de la dollarisation de l'économie congolaise (RDC)," Mondes en développement, De Boeck Université, vol. 130(2), pages 41-62.
    2. Mr. Robert Tchaidze & Mr. Salome Tvalodze, 2011. "Deposit Formation in Georgia," IMF Working Papers 2011/078, International Monetary Fund.
    3. Nina Budina & Sweder Van Wijnbergen, 2001. "Fiscal deficits, monetary reform and inflation stabilization in romania," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 4(3), pages 165-194.
    4. Daniels, Joseph P. & VanHoose, David D., 2003. "Currency substitution, seigniorage, and currency crises in interdependent economies," Journal of Economics and Business, Elsevier, vol. 55(3), pages 221-232.
    5. Budina, Nina & Maliszewski, Wojciech & de Menil, Georges & Turlea, Geomina, 2006. "Money, inflation and output in Romania, 1992-2000," Journal of International Money and Finance, Elsevier, vol. 25(2), pages 330-347, March.
    6. Yu Hsing, 2006. "Tests of Functional Forms, Currency Substitution, and Capital Mobility of Czech Money Demand Function," Prague Economic Papers, Prague University of Economics and Business, vol. 2006(4), pages 291-299.
    7. Gaetano Antinolfi & Claudia M. Landeo & Maxim Nikitin, 2007. "Dollarization and the inflation threshold," Canadian Journal of Economics, Canadian Economics Association, vol. 40(2), pages 628-649, May.
    8. van Wijnbergen, Sweder & Budina, Nina, 2001. "Inflation Stabilization, Fiscal Deficits, and Public Debt Management in Poland," Journal of Comparative Economics, Elsevier, vol. 29(2), pages 293-309, June.
    9. Dumitru, Ionut, 2002. "Money Demand in Romania," MPRA Paper 10629, University Library of Munich, Germany.
    10. Claudiu Albulescu & Dominique P'epin, 2016. "The loss of interest for the euro in Romania," Papers 1609.01900, arXiv.org.
    11. C. T. Albulescu & D. Pépin, 2019. "The money demand and the loss of interest for the euro in Romania," Applied Economics Letters, Taylor & Francis Journals, vol. 26(3), pages 196-201, February.
    12. Claudiu Albulescu & Dominique Pépin, 2016. "The loss of interest for the euro in Romania," Working Papers hal-01361214, HAL.

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