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Revisiting Dollarisation Hysteresis: Evidence from Bolivia, Turkey and Indonesia

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  • Miguel Lebre de Freitas

    ()
    (Universidade de Aveiro and NIPE)

Abstract

In this paper, we pick up three countries with different inflation experiences and dollarisation levels and we investigate whether dollarisation exhibits different reversibility patterns, as suggested by the literature. The sample includes a country that experienced hyperinflation (Bolivia), a high inflation country (Turkey) and a country that experienced moderate to low inflation (Indonesia). By providing evidence of dollarisation hysteresis in these three countries, this paper challenges the view according to which this phenomenon is confined to highly dollarised economies or to economies that experienced high inflation rates for long periods of time.

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Bibliographic Info

Paper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number 12/2003.

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Date of creation: 2003
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Handle: RePEc:nip:nipewp:12/2003

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Keywords: Money demand; currency substitution; dollarisation; hysteresis.;

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References

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  1. Mohamed El-Erian, 1988. "Currency Substitution in Egypt and the Yemen Arab Republic: A Comparative Quantitative Analysis," IMF Staff Papers, Palgrave Macmillan, vol. 35(1), pages 85-103, March.
  2. Rogers, John H, 1992. "The Currency Substitution Hypothesis and Relative Money Demand in Mexico and Canada," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(3), pages 300-318, August.
  3. Dornbusch, Rudiger & Reynoso, Alejandro, 1989. "Financial Factors in Economic Development," American Economic Review, American Economic Association, vol. 79(2), pages 204-09, May.
  4. Martin Uribe, 1995. "Hysteresis in a simple model of currency substitution," International Finance Discussion Papers 509, Board of Governors of the Federal Reserve System (U.S.).
  5. repec:fth:inseep:9645 is not listed on IDEAS
  6. Melvin, Michael & de la Parra, Gonzalo Afcha, 1989. "Dollar currency in Latin America : A Bolivian application," Economics Letters, Elsevier, vol. 31(4), pages 393-397, December.
  7. William H. Branson & Dale W. Henderson, 1984. "The Specification and Influence of Asset Markets," NBER Working Papers 1283, National Bureau of Economic Research, Inc.
  8. Akcay, O. Cevdet & Alper, C. Emre & Karasulu, Meral, 1997. "Currency substitution and exchange rate instability: The Turkish case," European Economic Review, Elsevier, vol. 41(3-5), pages 827-835, April.
  9. Liliana Rojas-Suárez, 1992. "Currency Substitution and Inflation in Peru," IMF Working Papers 92/33, International Monetary Fund.
  10. Ratti, Ronald A & Jeong, Byung Woo, 1994. "Variation in the real exchange rate as a source of currency substitution," Journal of International Money and Finance, Elsevier, vol. 13(5), pages 537-550, October.
  11. Joannes Mongardini & Johannes Mueller, 1999. "Rachet Effects in Currency Substitution - An Application to the Kyrgyz Republic," IMF Working Papers 99/102, International Monetary Fund.
  12. Pesaran, M. H. & Shin, Y. & Smith, R. J., 1996. "Testing for the 'Existence of a Long-run Relationship'," Cambridge Working Papers in Economics 9622, Faculty of Economics, University of Cambridge.
  13. Smith, Constance E, 1995. "Substitution, Income, and Intertemporal Effects in Currency-Substitution Models," Review of International Economics, Wiley Blackwell, vol. 3(1), pages 53-59, February.
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Cited by:
  1. Lazea, Valentin & Cozmanca, Bogdan Octavian, 2003. "Currency substitution in Romania," MPRA Paper 19813, University Library of Munich, Germany.

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