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Currency substitution in Romania

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Author Info

  • Lazea, Valentin
  • Cozmanca, Bogdan Octavian

Abstract

The aim of this paper is to investigate the currency substitution phenomenon in Romania. We present the evolution of the DI (Dollarization Index) as it is defined by the IMF, the situation on the liabilities side and that of the banking sector. We assess the way in which the traditional functions of money have been affected by currency substitution. In the final part of this paper a demand for money function is estimated for Romania for a period between 1997:06—2003:03. This demand for money clearly demonstrates the existence of currency substitution between the domestic and foreign currencies. Also we test the stability of the model and conclude that despite a turbulent economic medium the demand for money function is stable.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 19813.

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Date of creation: May 2003
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Handle: RePEc:pra:mprapa:19813

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Related research

Keywords: currency substitution; money demand; cointegration; error-correction model; Romania;

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References

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  1. Bas van Aarle & Nina Budina, 1997. "Currency Substitution in Eastern Europe," Politická ekonomie, University of Economics, Prague, University of Economics, Prague, vol. 1997(2), pages 171-182.
  2. Uribe, Martin, 1997. "Hysteresis in a simple model of currency substitution," Journal of Monetary Economics, Elsevier, Elsevier, vol. 40(1), pages 185-202, September.
  3. Bredin, Don & Cuthbertson, Keith, 2001. "Money Demand in the Czech Republic since Transition," Research Technical Papers 3/RT/01, Central Bank of Ireland.
  4. Neil R. Ericsson & Sunil Sharma, 1996. "Broad money demand and financial liberalization in Greece," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 559, Board of Governors of the Federal Reserve System (U.S.).
  5. Subramanian S. Sriram, 1999. "Survey of Literatureon Demand for Money," IMF Working Papers 99/64, International Monetary Fund.
  6. Aarle, B. van & Budina, N., 1995. "Currency substitution in Eastern Europe," Discussion Paper, Tilburg University, Center for Economic Research 1995-2, Tilburg University, Center for Economic Research.
  7. Brian M. Doyle, 2000. ""Here, dollars, dollars ..."estimating currency demand and worldwide currency substitution," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 657, Board of Governors of the Federal Reserve System (U.S.).
  8. Dickey, David A & Rossana, Robert J, 1994. "Cointegrated Time Series: A Guide to Estimation and Hypothesis Testing," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 56(3), pages 325-53, August.
  9. Joannes Mongardini & Johannes Mueller, 1999. "Rachet Effects in Currency Substitution," IMF Working Papers 99/102, International Monetary Fund.
  10. Luboš Komárek & Martin Meleck�, 2003. "Currency Substitution in a Transitional Economy with an Application to the Czech Republic," Eastern European Economics, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 41(4), pages 72-99, July.
  11. Miguel Lebre de Freitas, 2003. "Revisiting Dollarisation Hysteresis: Evidence from Bolivia, Turkey and Indonesia," NIPE Working Papers, NIPE - Universidade do Minho 12/2003, NIPE - Universidade do Minho.
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Cited by:
  1. Jelena Maravic & Mirjana Palic, 2005. "Econometric Analysis of Money Demand in Serbia," Working papers, National Bank of Serbia 2, National Bank of Serbia.

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