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Cambodia's Persistent Dollarization: Causes and Policy Options

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Abstract

Cambodia's economic and social achievements over the past ten years have been the most impressive in its history. Nevertheless, Cambodia today is still as dollarized, if not more so, than it was ten years ago. What is this so, and what, if anything, should the Government do? This paper attempts to answer both these questions, by examining the reasons behind the apparent paradox between a decade of economic and political improvements and continued dollarization, and drawing policy implications from it. We advise against pursuing enforced dedollarization, and advocate a policy option that focuses instead on accelerating accommodative reforms, especially in the financial sector and on legal and institutional reforms. We also identify a host of institutional barriers that need to be overcome to prepare the groundwork for a natural process of de-dollarization.

Suggested Citation

  • Menon, Jayant, 2008. "Cambodia's Persistent Dollarization: Causes and Policy Options," Working Papers on Regional Economic Integration 19, Asian Development Bank.
    • Handle: RePEc:ris:adbrei:0019
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    1. repec:spr:jecfin:v:41:y:2017:i:4:d:10.1007_s12197-016-9379-1 is not listed on IDEAS
    2. Schou-Zibell, Lotte & Madhur, Srinivasa, 2010. "Regulatory Reforms for Improving the Business Environment in Selected Asian Economies - How Monitoring and Comparative Benchmarking Can Provide Incentive for Reform," Working Papers on Regional Economic Integration 40, Asian Development Bank.
    3. Rigg, Robert & Schou-Zibell, Lotte, 2009. "The Financial Crisis and Money Markets in Emerging Asia," Working Papers on Regional Economic Integration 38, Asian Development Bank.
    4. Hal Hill, 2013. "Is there a Southeast Asian Development Model?," Departmental Working Papers 2013-19, The Australian National University, Arndt-Corden Department of Economics.
    5. Hal Hill & Jayant Menon, 2014. "Cambodia: Rapid Growth in an Open, Post-conflict Economy," The World Economy, Wiley Blackwell, vol. 37(12), pages 1649-1668, December.
    6. Anna Krupkina & Alexey Ponomarenko, 2017. "Deposit dollarization in emerging markets: modelling the hysteresis effect," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 41(4), pages 794-805, October.
    7. Samreth, Sovannroeun, 2011. "An empirical study on the hysteresis of currency substitution in Cambodia," Journal of Asian Economics, Elsevier, vol. 22(6), pages 518-527.
    8. Nombulelo Braiton, 2011. "Dollarization in Cambodia; Causes and Policy Implications," IMF Working Papers 11/49, International Monetary Fund.
    9. Madhur, Srinivasa & Wignaraja, Ganeshan & Darjes, Peter, 2009. "Roads for Asian Integration: Measuring ADB's Contribution to the Asian Highway Network," Working Papers on Regional Economic Integration 37, Asian Development Bank.
    10. Reza Y. Siregar & Narith Chan, 2014. "Factors behind Foreign Currency Holding by Household in Cambodia," CAMA Working Papers 2014-58, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    11. Jayant Menon, 2013. "Narrowing the development divide in ASEAN: the role of policy," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 27(2), pages 25-51, November.
    12. Warwick McKibbin & Waranya Pim Chanthapun, 2009. "Exchange Rate Regimes in the Asia-Pacific Region and the Global Financial Crisis," CAMA Working Papers 2009-30, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    13. Hal Hill & Jayant Menon, 2013. "Cambodia: Rapid Growth with Weak Institutions," Asian Economic Policy Review, Japan Center for Economic Research, vol. 8(1), pages 46-65, June.
    14. 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.
    15. AIBA, Daiju, 2016. "Financial Dollarization: Evidence from a Survey on Branches of Cambodian Financial Institutions," Discussion Papers 2016-09, Graduate School of Economics, Hitotsubashi University.

    More about this item

    Keywords

    Cambodia; dollarization; exchange rates; currency board; hysteresis;

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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