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The Demand for Currency Substitution

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Author Info
John J. Seater () (North Carolina State University, USA)
Abstract

A transactions model of the demand for multiple media of exchange is developed. Some results are expected, and others are both new and surprising. There are both extensive and intensive margins to currency substitution, and inflation may affect the two margins differently, leading to subtle incentives to adopt or abandon a substitute currency. Variables not previously considered in the literature affect currency substitution in complex and somewhat unexpected ways. In particular, the level of income and the composition of consumption expenditures are important, and they interact with the other variables in the model. Independent empirical work provides support for the theory.

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File URL: http://www.panoeconomicus.rs/casopis/dvanaestibroj/the%20demand%20for%20currency%20substitution.pdf
File Format: application/pdf
File Function: Translation in Serbian language, 2008
Download Restriction: no

Publisher Info
Paper provided by Faculty of economics, Department of Economics in its series Working Papers with number 200841.

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Length: 32 pages
Date of creation: Nov 2008
Date of revision: Nov 2008
Publication status: Published in Economics: The Open-Access, Open-Assessment E-Journal (2008),2 (35), http://www.economics-ejournal.org/economics/journalarticles/2008-35, Serbian translation published in Panoeconomicus, December 2008, pages 405-437
Handle: RePEc:voj:wpaper:200841

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Web page: http://www.panoeconomicus.rs/

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Related research
Keywords: Currency substitution; Dollarization;

Find related papers by JEL classification:
E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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This page was last updated on 2009-11-22.

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