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Author: Paul Reding Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
It is a known fact that the use of foreign currency by domestic residents shows significance persistence, even hysteresis. Temporary changes in the inflation rate can have permanent effects on the degree of currency substitution, as illustrated by the case of Bolivia, where dollarization has remained at a particularly high level after stabilization. The paper presents a simple model of currency substitution with network effects among agents with heterogeneous transaction costs. A network of foreign currency users reduces transactions costs for all prospective users of this currency. The strength of the network effects increases with size, which is defined as the number of agents whose foreign currency balances are larger than a given threshold. The network's size is endogenously determined. Its dynamics and the possibility of multiple equilibria generate patterns of currency substitution which exhibit persistence and hysteresis.
Author: Paul Reding Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
It is a known fact that the use of foreign currency by domestic residents shows significance persistence, even hysteresis. Temporary changes in the inflation rate can have permanent effects on the degree of currency substitution, as illustrated by the case of Bolivia, where dollarization has remained at a particularly high level after stabilization. The paper presents a simple model of currency substitution with network effects among agents with heterogeneous transaction costs. A network of foreign currency users reduces transactions costs for all prospective users of this currency. The strength of the network effects increases with size, which is defined as the number of agents whose foreign currency balances are larger than a given threshold. The network's size is endogenously determined. Its dynamics and the possibility of multiple equilibria generate patterns of currency substitution which exhibit persistence and hysteresis.
Author: Nienke Oomes Publisher: International Monetary Fund ISBN: 1451851936 Category : Business & Economics Languages : en Pages : 37
Book Description
Dollarization in Russia increased rapidly during the early 1990s, but failed to come down in the second half of the 1990s in spite of exchange rate stabilization. To explain this "dollarization hysteresis," this paper develops a model in which network externalities in the demand for currency can generate multiple stable steady states for the dollarization ratio. The model is estimated using a new source of data on dollar currency holdings in Russia. On the basis of these estimates, which confirm the existence of network externalities, the paper discusses several policies that could result in a permanent decrease in dollarization.
Author: Neven T. Valev Publisher: ISBN: Category : Languages : en Pages : 28
Book Description
It is widely documented that currency substitution (using foreign money in transactions) increases in periods of high inflation but does not decline once inflation is reduced. The paper uses survey data from Bulgaria, which experienced this phenomenon, to investigate the origins of this ratchet effect. We find that expected devaluation of the domestic currency, while relatively high, does not play a major role in sustaining the dollarization of transactions. Conversely, preferences for the use of foreign money are strongly influenced by people's perception that foreign money is already widely used in the economy.
Author: Dominick Salvatore Publisher: Oxford University Press, USA ISBN: 019515536X Category : Business & Economics Languages : en Pages : 491
Book Description
This book takes a global approach to one of today's most controversial topics in business: Dollarization. With the collapse of the former Soviet Union, and the formation of the Euro in Europe, many countries are debating whether or not a common currency is in their best interest. This intriguing volume brings together the leading participants in the current dollarization debates.
Author: Publisher: ISBN: Category : Languages : en Pages :
Book Description
The Federal Reserve Bank of Philadelphia presents the full text of the 1997 working paper entitled "Dollarization Hysteresis and Network Externalities: Theory and Evidence from an Informal Bolivian Credit Market," written by Bettina Peiers and Jeffrey M. Wrase. The text is available in PDF format. This paper examines network externalities from currency acceptability as a determinant of observed persistence of dollarization in Latin American countries and develops a model. The authors find that credible exchange rate stabilization policy alone is not sufficient to achieve dollarization reversal.
Author: Koji Kubo Publisher: Palgrave Macmillan ISBN: 9783319577678 Category : Business & Economics Languages : en Pages : 0
Book Description
This book sheds light on the dollarization trends of four transitional economies in Southeast Asia: Cambodia, Lao PDR, Myanmar, and Vietnam. Moving beyond the tendency to focus on the Latin American experience of dollarization and prolonged high inflation, the chapters in this book compare how payment dollarization has been more persistent than other types of dollarization in this region due to network externalities. The book illustrates that dollarization started in the underdeveloped financial system in these countries and that dollarization interacted with financial development, which is in contrast to dollarization in Latin America. This project extends the frontiers of empirical studies on dollarization. It will be of interest to students, researchers and policy makers concerned with dollarization and economics in Southeast Asia.
Author: Paul Reding
Author: Paul Reding
Author: Nienke Oomes
Author: Neven T. Valev
Author: Nienke A. Oomes
Author: Bettina M. Peiers
Author: Dominick Salvatore
Author: 
Author: Bettina Peiers
Author: Zaid Jamal Albarzinji
Author: Koji Kubo