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Dollarization and Euroization in Transition Countries: Currency Substitution, Asset Substitution, Network Externalities and Irreversibility

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Author Info

  • Edgar Feige

    (The University of Wisconsin-Madison)

  • James Dean

    (Simon Fraser University)

Abstract

We examine the extent, causes and consequences of transition countries’ use of foreign currency as a co-circulating medium of exchange and store of value. Using new estimates of foreign cash in circulation, we obtain unique measures of currency substitution, asset substitution, and dollarization, and examine the consequences of network externalities for hysteresis and irreversibility. Finally, we examine factors leading some transition countries to euroize officially and bilaterally, and others to euroize unilaterally - that is, without prior sanction by the EMU.

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File URL: http://128.118.178.162/eps/if/papers/0205/0205003.pdf
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Bibliographic Info

Paper provided by EconWPA in its series International Finance with number 0205003.

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Length: 27 pages
Date of creation: 10 May 2002
Date of revision:
Handle: RePEc:wpa:wuwpif:0205003

Note: Type of Document - PDF; prepared on IBM PC ; to print on HP/PostScript; pages: 27 ; figures: included. Presented at the Fordham University International Conference on “Euro and Dollarization: Forms of Monetary Union in Integrating Regions” April 5 - 6, 2002, New York
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Web page: http://128.118.178.162

Related research

Keywords: dollarization; euroization; transition economies; currency substitution; asset substitution; foreign currency; network externalities; irreversibility; underground economy;

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References

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  1. Edgar L. Feige & Vedran Šošiæ & Michael Faulend & Velimir Šonje, 2002. "Unofficial Dollarization in Latin America: Currency Substitution, Network Externalities and Irreversibility," International Finance 0205002, EconWPA.
  2. Adam Bennett & Eduardo Borensztein & Tomás J. T. Baliño, 1999. "Monetary Policy in Dollarized Economies," IMF Occasional Papers 171, International Monetary Fund.
  3. Feige, Edgar L., 1990. "Defining and estimating underground and informal economies: The new institutional economics approach," World Development, Elsevier, vol. 18(7), pages 989-1002, July.
  4. Brian M. Doyle, 2000. ""Here, dollars, dollars ..."estimating currency demand and worldwide currency substitution," International Finance Discussion Papers 657, Board of Governors of the Federal Reserve System (U.S.).
  5. Willem H. Buiter & Clemens Grafe, 2001. "Central Banking and the Choice of Currency Regime in Accession Countries," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
  6. Richard D. Porter & Ruth A. Judson, 1996. "The location of U.S. currency: how much is abroad?," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Oct, pages 883-903.
  7. Dean, James W., 2001. "Should Latin America's common law marriages to the US dollar be legalized? Should Canada's?," Journal of Policy Modeling, Elsevier, vol. 23(3), pages 291-300, April.
  8. Feige, Edgar L., 1997. "Revised estimates of the Underground Economy: Implications of US Currency held abroad," MPRA Paper 13805, University Library of Munich, Germany.
  9. Edgar L. Feige & Michael Faulend & Velimir Sonje & Vedran Sosic, 2001. "Currency Substitution, Unoffical Dollarization and Estimates of Foreign Currency Held Abroad: The Case of Croatia," International Finance 0106001, EconWPA.
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Citations

Blog mentions

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  1. Islandczycy chcą zamienić koronę na nicponia
    by k.mokrzycka in Obserwator Finansowy on 2012-04-07 04:00:19
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Cited by:
  1. Erber, Georg, 2010. "The Problem of Money Illusion in Economics," MPRA Paper 24246, University Library of Munich, Germany.
  2. Thomas Scheiber & Helmut Stix, 2009. "Euroization in Central, Eastern and Southeastern Europe – New Evidence On Its Extent and Some Evidence On Its Causes," Working Papers 159, Oesterreichische Nationalbank (Austrian Central Bank).
  3. repec:hal:cesptp:hal-00270544 is not listed on IDEAS
  4. Doris Ritzberger-Grünwald & Thomas Scheiber, 2012. "Euro Cash in Central, Eastern and Southeastern Europe," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 41–55.
  5. Helmut Stix, 2008. "Euroization: What Factors drive its Persistence?," Working Papers 140, Oesterreichische Nationalbank (Austrian Central Bank).
  6. Pistor, Katharina, 2010. "Into the Void: Governing Finance in Central and Eastern Europe," Working Paper Series wp2010-65, World Institute for Development Economic Research (UNU-WIDER).
  7. Elisabeth Beckmann & Thomas Scheiber, 2012. "The Impact of Memories of High Inflation on Households’ Trust in Currencies," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 4.
  8. Dean, James W., 2004. "Adopting the Euro: tradeoffs and challenges facing the new EU-ten," Journal of Policy Modeling, Elsevier, vol. 26(7), pages 759-767, October.

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