Choice of the substitution currency in Russia: How to explain the dollar's dominance?
AbstractThe analysis of external economic relations of Russia reveals a paradox: while Europe is the main trade and direct investment partner of Russia, this is far from being the case concerning its currency’s role in Russia's financial activities. The dollar is much preferred by economic agents for financial operations. This paper proposes a disaggregated approach to this issue by separating the ‘means of exchange’ and ‘store of value’ components of the use of substitution currencies. The influence of three main factors (inertial component, real trade relations and exchange rate fluctuations) on the relative demand for the euro by Russian economic agents is tested for the period 1999-2004. Finally we suggest a theoretical interpretation of the results based on the conventions theory approach.
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Bibliographic InfoPaper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 15/2005.
Length: 43 pages
Date of creation: 01 Dec 2005
Date of revision:
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Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
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More information through EDIRC
dollarisation; euroisation; transition; Russia; currency substitution; asset substitution; network externalities; hysteresis; conventions;
Find related papers by JEL classification:
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- G20 - Financial Economics - - Financial Institutions and Services - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-10-07 (All new papers)
- NEP-CBA-2006-10-07 (Central Banking)
- NEP-CIS-2006-10-07 (Confederation of Independent States)
- NEP-FIN-2006-10-07 (Finance)
- NEP-FMK-2006-10-07 (Financial Markets)
- NEP-IFN-2006-10-07 (International Finance)
- NEP-MAC-2006-10-07 (Macroeconomics)
- NEP-MON-2006-10-07 (Monetary Economics)
- NEP-TRA-2006-10-07 (Transition Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Harrison , Barry & Vymyatnina, Yulia, 2007. "Currency substitution in a de-dollarizing economy: The case of Russia," BOFIT Discussion Papers 3/2007, Bank of Finland, Institute for Economies in Transition.
- 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.
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