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Shortage and currency substitution in transition economies: Bulgaria, Hungary, Poland, and Romania

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  • Robert Mulligan
  • Erwin Nijsse

Abstract

This paper examines currency substitution in Bulgaria, Hungary, Poland, and Romania during the end of central planning and transition to market economies. Before liberalization, central European economies faced increasing shortage and repressed inflation in the official sector. Households held substantial wealth in real assets and foreign currency. Furthermore, part of their savings was held as hunting money against potential opportunities to buy in bulk at bargain prices in official stores or pay a premium price on the black market. The shift from centrally-planned to market economies is modeled with a shortage variable. Foreign currency demand and consumption functions are estimated by the Johansen procedure. Environmental constraints play a key role in interpreting estimates. The official sector shortage is an important determinant of foreign currency demand in each country. Copyright International Atlantic Economic Society 2001

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  • Robert Mulligan & Erwin Nijsse, 2001. "Shortage and currency substitution in transition economies: Bulgaria, Hungary, Poland, and Romania," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 7(3), pages 275-295, August.
    • Handle: RePEc:kap:iaecre:v:7:y:2001:i:3:p:275-295:10.1007/bf02295398
    DOI: 10.1007/BF02295398
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    Cited by:

    1. Claudiu Albulescu & Dominique P'epin, 2016. "The loss of interest for the euro in Romania," Papers 1609.01900, arXiv.org.
    2. Olga Aslanidi, 2008. "Dollarization in Transition Economies: New Evidence from Georgia," CERGE-EI Working Papers wp366, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    3. C. T. Albulescu & D. Pépin, 2019. "The money demand and the loss of interest for the euro in Romania," Applied Economics Letters, Taylor & Francis Journals, vol. 26(3), pages 196-201, February.
    4. Claudiu Albulescu & Dominique Pépin, 2016. "The loss of interest for the euro in Romania," Working Papers hal-01361214, HAL.

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