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Dollarization in Cambodia; Causes and Policy Implications


  • Nombulelo Braiton


Over the past decade, Cambodia has become Asia’s most dollarized economy. In contrast, dollarization in neighboring Lao P.D.R., Mongolia, and Vietnam has been either declining or broadly stable. Somewhat paradoxically, growing dollarization in Cambodia has occurred against the backdrop of greater macroeconomic and political stability. The usual motive, currency substitution, does not appear to have been a factor. As the volume of dollars increased over the years, so has the volume of riel. A strong inward flow of dollars related to garments sector exports, tourism receipts, foreign direct investment, and aid, has benefitted the dollar based urban economy. The riel based rural economy has, however, lagged behind. Given international experience in de-dollarization, a carefully managed market based strategy, supported by a continued stable macroeconomic environment is essential for Cambodia’s de-dollarization.

Suggested Citation

  • Nombulelo Braiton, 2011. "Dollarization in Cambodia; Causes and Policy Implications," IMF Working Papers 11/49, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:11/49

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    References listed on IDEAS

    1. Luis Oscar Herrera & Rodrigo Valdes, 2005. "De-dollarization, Indexation and Nominalization: the Chilean Experience," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 8(4), pages 281-312.
    2. Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2014. "Addicted to Dollars," Annals of Economics and Finance, Society for AEF, vol. 15(1), pages 1-50, May.
    3. Owen F. Humpage, 2002. "An incentive-compatible suggestion for seigniorage sharing with dollarizing countries," Policy Discussion Papers, Federal Reserve Bank of Cleveland, issue Jun.
    4. Eduardo Levy Yeyati & Alain Ize, 2005. "Financial De-Dollarization; Is it for Real?," IMF Working Papers 05/187, International Monetary Fund.
    5. Bufman, Gil & Leiderman, Leonardo, 1993. "Currency Substitution under Nonexpected Utility: Some Empirical Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(3), pages 320-335, August.
    6. Menon, Jayant, 2008. "Cambodia's Persistent Dollarization: Causes and Policy Options," Working Papers on Regional Economic Integration 19, Asian Development Bank.
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    Cited by:

    1. Buth, Bora & Kakinaka, Makoto & Miyamoto, Hiroaki, 2015. "Inflation and inflation uncertainty: The case of Cambodia, Lao PDR, and Vietnam," Journal of Asian Economics, Elsevier, vol. 38(C), pages 31-43.
    2. Hal Hill & Jayant Menon, 2011. "Reducing Vulnerability in Transition Economies: Crises and Adjustment in Cambodia," Departmental Working Papers 2011-08, The Australian National University, Arndt-Corden Department of Economics.

    More about this item


    Dollarization; Cambodia; Vector autoregression; seigniorage; foreign currency; monetary policy; inflation; macroeconomic stability; Central Banking; And The Supply Of Money And Credit;

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