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Currency substitution and seignorage in eastern europe

Author

Listed:
  • Bas Van Aarle
  • Nina Budina

Abstract

Economic and political uncertainty, high inflation and liberalization of foreign exchange restrictions have encouraged substantial currency substitution in the economies in transition. This paper presents empirical evidence on currency substitution in four Eastern European countries in transition: Poland, Hungary, Romania and Bulgaria. It is shown how currency substitution affects money demand and by that seignorage revenues. The empirical estimates of the money demand functions are used to calculate the seignorage maximizing rate of inflation in the economies in transition.

Suggested Citation

  • Bas Van Aarle & Nina Budina, 1996. "Currency substitution and seignorage in eastern europe," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 1(3), pages 279-298.
  • Handle: RePEc:taf:jpolrf:v:1:y:1996:i:3:p:279-298 DOI: 10.1080/13841289608523365
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    Citations

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    Cited by:

    1. Claudiu Albulescu & Dominique Pépin, 2016. "The loss of interest for the euro in Romania," Working Papers hal-01361214, HAL.
    2. Kola Lendele & Joseph Kamanda Kimona-Mbinga, 2005. "Nature et spécificité de la dollarisation de l'économie congolaise (RDC)," Mondes en développement, De Boeck Université, vol. 130(2), pages 41-62.
    3. Daniels, Joseph P. & VanHoose, David D., 2003. "Currency substitution, seigniorage, and currency crises in interdependent economies," Journal of Economics and Business, Elsevier, pages 221-232.
    4. Budina, Nina & Maliszewski, Wojciech & de Menil, Georges & Turlea, Geomina, 2006. "Money, inflation and output in Romania, 1992-2000," Journal of International Money and Finance, Elsevier, vol. 25(2), pages 330-347, March.
    5. Robert Tchaidze & Salome Tvalodze, 2011. "Deposit Formation in Georgia," IMF Working Papers 11/78, International Monetary Fund.
    6. Yu Hsing, 2006. "Tests of Functional Forms, Currency Substitution, and Capital Mobility of Czech Money Demand Function," Prague Economic Papers, University of Economics, Prague, pages 291-299.
    7. Sweder van Wijnbergen & Nina Budina, 1999. "Inflation Stabilization, Fiscal Deficits and Public Debt Management in Poland," Tinbergen Institute Discussion Papers 99-022/2, Tinbergen Institute.
    8. Dumitru, Ionut, 2002. "Money Demand in Romania," MPRA Paper 10629, University Library of Munich, Germany.
    9. van Wijnbergen, Sweder & Budina, Nina, 2001. "Inflation Stabilization, Fiscal Deficits, and Public Debt Management in Poland," Journal of Comparative Economics, Elsevier, pages 293-309.

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