Financial sector development and the macrodynamics of ‘de facto’ dollarisation in developing countries: the case of Ghana
Following the massive economic policy restructuring and reforms since the early 1980s, currency substitution, asset substitution and de facto dollarisation have become common phenomena in nearly all transition and developing economies. High and persistent inflation which have been a perennial feature of developing and transition economies is now known to be highly responsible for currency substitution, asset substitution and de facto dollarisation. This paper presents evidence on the macrodynamics of de facto dollarisation, currency substitution and asset substitution during the era of the implementation of the Financial Sector Adjustment Programmes (FINSAPs) in developing and transition economies with special reference to Ghana. The study has found out that de facto dollarisation whether in the form of asset substitution or currency substitution is highly prevalent and poses a serious threat to fiscal and monetary policies effectiveness in developing and transition economies. In Ghana, the principal long-run mainspring of de facto dollarisation is the ad hoc implementation of financial sector development programme that was embarked upon about two decades ago which has resulted in high exchange rate depreciation and price fluctuations. It is, however, likely that as the financial sector develops over a long period a time will come when further development of the financial sector would no longer instigate de facto dollarisation.
|Date of creation:||2007|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- McKinnon, Ronald I, 1982. "Currency Substitution and Instability in the World Dollar Standard," American Economic Review, American Economic Association, vol. 72(3), pages 320-333, June.
- Maurice Obstfeld, 1998.
"The Global Capital Market: Benefactor or Menace?,"
Journal of Economic Perspectives,
American Economic Association, vol. 12(4), pages 9-30, Fall.
- Maurice Obstfeld, 1998. "The Global Capital Market: Benefactor or Menace?," NBER Working Papers 6559, National Bureau of Economic Research, Inc.
- Maurice Obstfeld, 2000. "The Global Capital Market: Benefactor or Menace?," International Finance 0004001, EconWPA.
- Maurice Obstfeld., 1998. "The Global Capital Market: Benefactor or Menace?," Center for International and Development Economics Research (CIDER) Working Papers C98-098, University of California at Berkeley.
- Obstfeld, Maurice, 1998. "The Global Capital Market: Benefactor or Menace?," Center for International and Development Economics Research, Working Paper Series qt3kn3n2s8, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
- Fischer, Stanley, 1982. "Seigniorage and the Case for a National Money," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 295-313, April.
- Miguel A Savastano, 1996. "Dollarization in Latin America; Recent Evidence and Some Policy Issues," IMF Working Papers 96/4, International Monetary Fund.
- Mohamed El-Erian, 1988. "Currency Substitution in Egypt and the Yemen Arab Republic: A Comparative Quantitative Analysis," IMF Staff Papers, Palgrave Macmillan, vol. 35(1), pages 85-103, March.
- Demirguc-Kent, Asli & Detragiache, Enrica, 1998. "Financial liberalization and financial fragility," Policy Research Working Paper Series 1917, The World Bank.
- Enrica Detragiache & Asli Demirgüç-Kunt, 1998. "Financial Liberalization and Financial Fragility," IMF Working Papers 98/83, International Monetary Fund.
- Edgar L. Feige & Vedran Šošiæ & Michael Faulend & Velimir Šonje, 2002. "Unofficial Dollarization in Latin America: Currency Substitution, Network Externalities and Irreversibility," International Finance 0205002, EconWPA.
- Joannes Mongardini & Johannes Mueller, 2000. "Ratchet Effects in Currency Substitution: An Application to the Kyrgyz Republic," IMF Staff Papers, Palgrave Macmillan, vol. 47(2), pages 1-3.
- Joannes Mongardini & Johannes Mueller, 1999. "Rachet Effects in Currency Substitution; An Application to the Kyrgyz Republic," IMF Working Papers 99/102, International Monetary Fund.
- John J. Seater, 2008. "The Demand for Currency Substitution," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 55(4), pages 405-437, December.
- Seater, John J., 2008. "The Demand for Currency Substitution," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 2, pages 1-30.
- Seater, John J., 2008. "The Demand for Currency Substitution," Economics Discussion Papers 2008-2, Kiel Institute for the World Economy (IfW).
- Feige, Edgar L, 1994. "The Underground Economy and the Currency Enigma," Public Finance = Finances publiques, , vol. 49(Supplemen), pages 119-136.
- Edgar L. Feige, 2005. "The Underground Economy And The Currency Enigma," Macroeconomics 0502004, EconWPA.
- Akcay, O. Cevdet & Alper, C. Emre & Karasulu, Meral, 1997. "Currency substitution and exchange rate instability: The Turkish case," European Economic Review, Elsevier, vol. 41(3-5), pages 827-835, April.
- Feige, Edgar L., 1997. "Revised estimates of the Underground Economy: Implications of US Currency held abroad," MPRA Paper 13805, University Library of Munich, Germany.
- Liliana Rojas-Suárez, 1992. "Currency Substitution and Inflation in Peru," IMF Working Papers 92/33, International Monetary Fund.
- Friedman, Milton, 1971. "Government Revenue from Inflation," Journal of Political Economy, University of Chicago Press, vol. 79(4), pages 846-856, July-Aug..
- Edgar L. Feige, 2005. "The Anatomy Of The Underground Economy," Macroeconomics 0502011, EconWPA.
- Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
- Richard D. Porter & Ruth Judson, 1996. "The location of U.S. currency: how much is abroad?," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Oct, pages 883-903.
- Calvo, Guillermo & Vegh, Carlos, 1992. "Currency Substitution in Developing Countries: An Introduction," MPRA Paper 20338, University Library of Munich, Germany.
- Guillermo Calvo & Carlos A. Végh Gramont, 1992. "Currency Substitution in Developing Countries; An Introduction," IMF Working Papers 92/40, International Monetary Fund.
- Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
- Rogers, John H, 1990. "Foreign Inflation Transmission under Flexible Exchange Rates and Currency Substitution," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 22(2), pages 195-208, May.
- Rogers, J.H., 1989. "Foreign Inflation Transmission Under Flexible Exchange Rates And Currency Substitution," Papers 3-89-7, Pennsylvania State - Department of Economics.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Frederic S. Mishkin, 2001. "Financial Policies and the Prevention of Financial Crises in Emerging Market Countries," NBER Working Papers 8087, National Bureau of Economic Research, Inc.
- Agenor, Pierre-Richard & Khan, Mohsin S., 1996. "Foreign currency deposits and the demand for money in developing countries," Journal of Development Economics, Elsevier, vol. 50(1), pages 101-118, June.
- Mohsin S. Khan & Pierre-Richard Agénor, 1992. "Foreign Currency Deposits and the Demand for Money in Developing Countries," IMF Working Papers 92/1, International Monetary Fund.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:29333. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.