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Are Euro Cash Holdings in Central and Eastern Europe Driven by Experience or Anticipation? Results from an OeNB Survey

Although euroization is an important phenomenon in emerging markets, still very little is known about who holds how much euro and for what purposes. In this paper, we employ unique survey data to analyze various aspects of foreign currency holdings in five Central and Eastern European countries (CEECs). This allows us to study the impact of expectations and hysteresis on individual behavior. Our results show that a substantial share of the population in the countries under review holds euro cash. We fi nd little evidence that infl ation or exchange rate expectations are important determinants of euroization, whereas variables related to a country’s economic history seem to be of some signifi cance. Our results also indicate that the demand for euro and its use in domestic payments increases as the date of euro adoption approaches.

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Article provided by Oesterreichische Nationalbank (Austrian Central Bank) in its journal Focus on European Economic Integration.

Volume (Year): (2007)
Issue (Month): 1 ()
Pages: 77-100

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Handle: RePEc:onb:oenbfi:y:2007:i:1:b:2
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  1. M. Ruth & K. Donaghy & P. Kirshen, 2006. "Introduction," Chapters, in: Regional Climate Change and Variability, chapter 1 Edward Elgar.
  2. Bénédicte Vidaillet & V. D'Estaintot & P. Abécassis, 2005. "Introduction," Post-Print hal-00287137, HAL.
  3. Helmut Stix, 2004. "Foreign Currency Demand since 2002 - Evidence from Five Central and Eastern European Countries," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 5(4), pages 19-24, December.
  4. Edgar L. Feige, 2003. "The Dynamics of Currency Substitution, Asset Substitution and De facto Dollarization and Euroization in Transition Countries," Macroeconomics 0302005, EconWPA.
  5. Nikolay Nenovsky & S. Statev, 2006. "Introduction," Post-Print halshs-00260898, HAL.
  6. Helmut Stix, 2002. "The Euro in Central and Eastern Europe (CEE countries) : survey evidence from five countries," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 3(3), pages 33-38, 04.
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