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Macroeconomic Adjustment in a Highly Dollarized Economy

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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; foreign currency; inflation; monetary policy; high inflation; money supply; inflation rate; export sector; real interest rate; macroeconomic stability; lower inflation; foreign exchange; low inflation; currency boards; monetary financing; exchange rate depreciation; inflation performance; export earnings; terms of trade; effective exchange rates; exchange rate regimes; price level; market exchange rates; monetary aggregate; nominal interest rate; economic instability; real money; inflation rates; export license; capital flows; value of money; rational expectations; total exports; import prices; financial stability; printing money; exporters; real effective exchange rate; macroeconomic performance; real interest rates; rise in inflation; capital flight;

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    1. Zeljko Bogetic, 2005. "Official Dollarization: Current Experiences and Issues, Cato Journal, Vol. 20, No. 2 (Fall 2000), 179-213," International Finance, EconWPA 0510006, EconWPA.
    2. Sahay, Ratna & Vegh, Carlos, 1995. "Dollarization in transition economies: Evidence and policy implications," MPRA Paper 20490, University Library of Munich, Germany.
    3. Andrew Berg & Eduardo Borensztein, 2000. "The Choice of Exchange Rate Regime and Monetary Target in Highly Dollarized Economies," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 285-324, November.
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    22. repec:cto:journl:v:20:y:2000:i:1:p:43-47 is not listed on IDEAS
    23. Sarajevs, Vadims, 2000. "Econometric Analysis of Currency Substitution: A Case of Latvia," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 4/2000, Bank of Finland, Institute for Economies in Transition.
    24. Adam Bennett & Eduardo Borensztein & Tomás J. T. Baliño, 1999. "Monetary Policy in Dollarized Economies," IMF Occasional Papers 171, International Monetary Fund.
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    27. 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.
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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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