Choice of the Substitution Currency in Russia: How to Explain the Dollar’s Dominance?

6. Concluding Remarks Our analysis of features of choice between substitution currencies in Russia leads to the following conclusions. (1) The gap between the geographical structure of the real trade and the choice of substitution currency in Russia is significant: while European area dominates real sphere, the dollar still the main currency used in financial sphere. (2) Households and enterprises do not behave in the same manner: while exchange rate dynamic is highly important for households’ decisions, its influence on banks/enterprises decisions is quite insignificant. The observed euro appreciation, while favourable for the diversification of currency portfolios of households, keeps unchanged the choice of enterprises. On the other hand, the role of the increasing volume of real trade between Europe and Russia seems not to be a sufficient factor to reduce the dollar dominance. (3) The importance of the inertial component in the choice of substitution currency is confirmed in Russian case. The interpretation of this result from the point of view of conventions theory (which provides a general framework including network externalities and hysteresis approaches) supports the necessity of a disaggregated analysis to the dollarisation issues. The implication of each operation in collective game, the degree of risk aversion and the past experience seems to be necessary to be taken into account. This fact implies a weak short term efficiency of economic policies in this field: a long/medium term approach is necessary. In the future this scheme could be applied to the dollarisation as a whole in Russia first and to other countries, which are also concerned with the dollarisation problem.