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Macroeconomic Adjustment in a Highly Dollarized Economy: The Case of Cambodia

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  • International Monetary Fund
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    Abstract

    Cambodia became dollarized suddenly in the early 1990s, as a result of massive dollar inflows stemming from a postconflict situation. Considering that the amount of dollars in circulation is unusually high, we attempt to estimate the true degree of dollarization empirically. Our results show that Cambodia has been virtually fully dollarized since 1995. Against a background of severe institutional limitations, the authorities have implemented in recent years policies akin to those of a de facto currency board arrangement, in particular with respect to fiscal discipline. The paper concludes that this policy mix has been appropriate for Cambodia's circumstances.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/92.

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    Length: 53
    Date of creation: 01 May 2002
    Date of revision:
    Handle: RePEc:imf:imfwpa:02/92

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    Related research

    Keywords: Dollarization; Currency substitution; Exchange rates;

    References

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    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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    1. Mohsin S. Khan & Pierre-Richard Agénor, 1992. "Foreign Currency Deposits and the Demand for Money in Developing Countries," IMF Working Papers 92/1, International Monetary Fund.
    2. Reinhart, Carmen & Calvo, Guillermo, 1999. "Capital Flow Reversals,the Exchange Rate Debate,and Dollarization," MPRA Paper 8951, University Library of Munich, Germany.
    3. Nicolas A. Cuche & Martin K. Hess, 1999. "Estimating Monthly GDP In A General Kalman Filter Framework: Evidence From Switzerland," Working Papers 99.02, Swiss National Bank, Study Center Gerzensee.
    4. Adam Bennett & Eduardo Borensztein & Tomás J. T. Baliño, 1999. "Monetary Policy in Dollarized Economies," IMF Occasional Papers 171, International Monetary Fund.
    5. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
    6. Poloz, Stephen S., 1986. "Currency substitution and the precautionary demand for money," Journal of International Money and Finance, Elsevier, vol. 5(1), pages 115-124, March.
    7. Vetlov, Igor, 2001. "Dollarization in Lithuania: An Econometric Approach," BOFIT Discussion Papers 1/2001, Bank of Finland, Institute for Economies in Transition.
    8. Eduardo Borensztein & Andrew Berg, 2000. "The Choice of Exchange Rate Regime and Monetary Target in Highly Dollarized Economies," IMF Working Papers 00/29, International Monetary Fund.
    9. repec:cto:journl:v:20:y:2000:i:2:p:179-213 is not listed on IDEAS
    10. Johannes Mueller, 1994. "Dollarization in Lebanon," IMF Working Papers 94/129, International Monetary Fund.
    11. Reinhart, Carmen & Calvo, Guillermo, 2001. "Reflections on Dollarization," MPRA Paper 8206, University Library of Munich, Germany.
    12. Sarajevs, Vadims, 2000. "Econometric Analysis of Currency Substitution: A Case of Latvia," BOFIT Discussion Papers 4/2000, Bank of Finland, Institute for Economies in Transition.
    13. Jeffrey A. Frankel & Andrew K. Rose, 2000. "Estimating the Effect of Currency Unions on Trade and Output," NBER Working Papers 7857, National Bureau of Economic Research, Inc.
    14. מחקר - ביטוח לאומי, 2001. "Annual Survey 2000," Working Papers 17, National Insurance Institute of Israel.
    15. Joannes Mongardini & Johannes Mueller, 2000. "Ratchet Effects in Currency Substitution: An Application to the Kyrgyz Republic," IMF Staff Papers, Palgrave Macmillan, vol. 47(2), pages 3.
    16. זק בדנלק, 2001. "חברות בקופת חולים 1999-‎2000," Working Papers 450, National Insurance Institute of Israel.
    17. Sahay, Ratna & Vegh, Carlos, 1995. "Dollarization in transition economies: Evidence and policy implications," MPRA Paper 20490, University Library of Munich, Germany.
    18. Bolbol, Ali A., 1999. "Seigniorage, Dollarization and Public Debt: The Lebanese Civil War and Recovery Experience, 1982-97," World Development, Elsevier, vol. 27(10), pages 1861-1873, October.
    19. Ortiz, Guillermo, 1983. "Currency Substitution in Mexico: The Dollarization Problem," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 15(2), pages 174-85, May.
    20. repec:cto:journl:v:20:y:2000:i:1:p:43-47 is not listed on IDEAS
    21. Anonymous, 2001. "Cover Matter 2001," Proceedings: 2001 Regional Committee NC-221, October 1-2, 2001, McLean, Virginia 132381, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
    22. Eichengreen, Barry, 2001. "What problems can dollarization solve?," Journal of Policy Modeling, Elsevier, vol. 23(3), pages 267-277, April.
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    Cited by:
    1. Samreth, Sovannroeun, 2008. "Estimating Money Demand Function in Cambodia: ARDL Approach," MPRA Paper 16274, University Library of Munich, Germany, revised Jun 2009.

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