Browsing by Subject "valuuttasubstituutio"

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  • Dorbec, Anna (2005)
    BOFIT Discussion Papers 15/2005
    Published in Growth Resumption in the CIS Countries, ed. by Oleh Havrylyshyn and Lucio Vinhas de Souza, Springer (2006), pp. 40-72
    The analysis of external economic relations of Russia reveals a paradox: while Europe is the main trade and direct investment partner of Russia, this is far from being the case concerning its currency s role in Russia's financial activities.The dollar is much preferred by economic agents for financial operations.This paper proposes a disaggregated approach to this issue by separating the means of exchange and store of value components of the use of substitution currencies.The influence of three main factors (inertial component, real trade relations and exchange rate fluctuations) on the relative demand for the euro by Russian economic agents is tested for the period 1999-2004.Finally we suggest a theoretical interpretation of the results based on the conventions theory approach. Keywords: dollarisation, euroisation, transition, Russia, currency substitution, asset substitution, network externalities, hysteresis, conventions JEL classification: E52, E41, F31, F41,G20
  • Harrison, Barry; Vymyatnina, Yulia (2007)
    BOFIT Discussion Papers 3/2007
    Currency substitution, the use of foreign money to finance transactions between domestic residents, is a common feature of emerging market economies.Currency substitution reduces the stability of money demand functions in ways that can seriously undermine central bank credibility and its efforts to implement monetary policy.Most transition economies, including Russia, experienced widespread currency substitution in the early phase of transition.Following Russia's financial meltdown in 1998, its monetary authorities introduced a raft of changes that substantially improved the stability and performance of the macroeconomy and reduced currency substitution.This paper investigates currency substitution in the Russian economy in the post-crisis period of 1999-2005.Several measures of currency substitution and different modelling frameworks consistently suggest an on-going decline in currency substitution, a shift that has important implications for Russian monetary policy. JEL Classification: E58, F31, F41 Key words: currency substitution, transition economies, de-dollarization
  • Isakova, Asel (2010)
    BOFIT Discussion Papers 14/2010
    Published: Book chapter (pages 89-108) in Nowotny, E., Mooslechner, P., Ritzberger-Grünwald, D., The euro and economic stability: Focus on Central, Eastern and South-Eastern Europe, Edward Elgar, 2010.
    Underdeveloped financial markets and periods of high inflation have stimulated dollarization and currency substitution in the economies of Central Asia. Some authors argue that the latter can pose serious obstacles for the effective conduct of monetary policy and can affect households welfare.This study uses a model with money-in-the-utility function to estimate the elasticity of substitution between domestic and foreign currencies in three economies of Central Asia - Kazakhstan, the Kyrgyz Republic and Tajikistan. Utility derived from holding money balances is represented by a CES function with money holdings denominated in two currencies. The residents are assumed to diversify their monetary holdings due to instability of the domestic currency. The steady state analysis reveals that though currency substitution decreases governments seigniorage revenue, holding foreign money can be welfare generating if domestic currency depreciates vis-à-vis the currencies in which households foreign balances holdings are denominated. De-dollarization can only be achieved through further macroeconomic stabilization that will bring price and exchange rate stability. Financial sector development will also decrease currency substitution through the provision of reliable financial instruments and the gaining of public confidence.
  • Virén, Matti (1989)
    Bank of Finland Research Discussion Papers 31/1989
    This paper presents some Finnish evidence on the importance of currency substitution and financial innovations for money demand. It is also shown that conventional demand for money specifications which do not take these factors into account are clearly misspecified and produce unreasonable results. The problem is particularly acute for narrow concepts of money.
  • Brodsky, Boris (1997)
    This study assesses the causes of dollarization in Russia. Dollarization is defined here as the use of foreign currency both as a medium of exchange and store of value. According to different estimates, the current degree of dollarization of the Russian economy is 40-50 per cent.Inquiry into sources and mechanisms of dollarization in Russia reveals the main factors influencing its evolution - dynamics of inflation and the dollar exchange rate, as well as the uncertainty level of money and credit policy. The model of dollarization assessing the influence of key parameters of macroeconomic policy - inflation, exchange and interest rates - on dynamics of dollarization is created in the paper.Main conclusions and relationships of the model are tested on Russian data.Implications of obtained results for macroeconomic policy in Russia are discussed. Keywords:dollarization, monetary policy, models, Russia
  • Vetlov, Igor (2001)
    BOFIT Discussion Papers 1/2001
    The paper analyses the factors driving dollarization in Lithuania during the period from December 1992 to August 2000.Starting with a brief overview of the major economic and political developments in Lithuania, the study attempts to model the process of dollarization by applying rigorous time series analysis.In particular, it investigates the long- and short-run properties of the relationship between the dollarization ratio and interest rates paid on domestic and foreign currency deposits.The study identifies a relatively stable cointegrating relationship between variables, whereby the dollarization ratio is negatively related to the interest rate spread.In the constructed vector error correction model, the deviations from the long-run relationship are found be significant for the dynamics of all three variables. Overall, the model explains the development of dollarization rather well.Simple specification of the model is possible when interest rates reflect the major economic and political events relevant to the process of dollarization. Key words: dollarization, transition economy, currency board, unit roots, cointegration, vector error-correction
  • Sarajevs, Vadims (2000)
    BOFIT Discussion Papers 4/2000
    This paper examines a price-level target in a model with a forward-looking CalvoTaylor Phillips curve.Contrary to conventional wisdom, it is found that price-level targeting leads to a better trade-off between inflation and output-gap variability than inflation targeting, when the central bank acts under discretion.In some cases, price-level targeting under discretion results in the same equilibrium as inflation targeting under commitment.The paper provides a comprehensive econometric analysis of currency substitution for Latvia.Rather than drawing inferences on the degree of currency substitution from domestic money demand modelling, the most common approach to empirical analysis of the phenomenon, direct modelling of currency substitution ratio is applied.Extensive model construction, estimation, evaluation and testing are performed.Methodological issues are also discussed.No simple policy recommendations can be made at this stage of research, but a number of instruments are identified, which can be used by the authorities to influence currency substitution behaviour.
  • Ponomarenko, Alexey; Solovyeva, Alexandra; Vasilieva, Elena (2011)
    BOFIT Discussion Papers 36/2011
    Published in Macroeconomics and Finance in Emerging Market Economies, Vol. 6, No. 2, 221–243 (2013)
    We review some aspects of financial dollarization in Russia, applying the main relevant theories to analyze the dynamics of several dollarization indicators. An econometric model of the short run dynamics of deposit and loan dollarization is estimated for the last decade. We find that ruble appreciation was the main driver of the de-dollarization that occurred then and of the later episode of renewed dollarization. We estimate the overall (and sector-al) currency mismatches of the Russian economy. The results show a gradual improvement of the net foreign currency position of the public sector, where we have seen significant accumulation of international reserves by the Bank of Russia and repayment of government debt. Evidence is also presented for the significant currency risk vulnerability of the nonbanking private sector. Several existing empirical studies are examined in order to assess the growth losses of the Russian economy following the crisis of 2008, which was linked with the financial dollarization. Keywords: Financial dollarization, currency mismatch, balance sheet effects, Russia. JEL classification: E44, F34, G32.
  • Virén, Matti (1989)
    Bank of Finland Research Discussion Papers 19/1989
    This paper tests the hypothesis advanced particularly by McKinnon that the U.S. economy is strongly affected by the world supply of money and the U.S. effective exchange rate while the domestic money supply is of minor importance. This currency substitution hypothesis is tested by using monthly data for the floating exchange rate period 1973 - 1988. The empirical results give cle"ar support" to McKinnon's hypothesis.
  • Virén, Matti (1990)
    Bank of Finland Research Discussion Papers 20/1990
    This paper tests the hypothesis advanced particularly by McKinnon that the U.S. economy is strongly affected by the world supply of money and the U.S. effective exchange rate while the domestic money supply is of minor importance. This currency substitution hypothesis is tested using monthly data for the floating exchange rate period 1973 - 1989. The empirical results give clear support to McKinnon's hypothesis.
  • Korhonen, Iikka; Mehrotra, Aaron (2007)
    BOFIT Discussion Papers 14/2007
    Published in Emerging Markets Finance and Trade 46. (2), 2010, 5-19
    Estimating money demand functions for Russia following the 1998 crisis, we find a stable money demand relationship when augmented by a deterministic trend signifying falling velocity. As predicted by theory, higher income boosts demand for real rouble balances and the income elasticity of money is close to unity. Inflation affects the adjustment towards equilibrium, while broad money shocks lead to higher inflation. We also show that exchange rate fluctuations have a considerable influence on Russian money demand. The results indicate that Russian monetary authorities have been correct in using the money stock as an information variable and that the strong influence of exchange rate on money demand is likely to continue despite de-dollarisation of the Russian economy.
  • Sarajevs, Vadims (2000)
    BOFIT Discussion Papers 12/2000
    The impact of an unanticipated monetary shock in a small open economy with dollarization, factor price rigidities, and nontradeables is re-examined in an optimizing intertemporal general equilibrium model.The framework of an earlier study is extended to incorporate foreign real money balances into the representative agent's utility function and to account for the phenomenon of dollarization so characteristic of transition economies.The major finding is that in the event of small monetary shocks, the presence of dollarization does not alter the outcome that relates the sign of response of consumption, current account balance, and other macroeconomic variables to the difference between intertemporal and intratemporal elasticities of substitutions of the total consumption index.The solution also shows that the elasticity of intertemporal substitution of money services and the share of traded goods in total consumption - a proxy for openness of the economy - are the crucial parameters in determining the response and the possibility of overshooting of the model variables, with economic openness playing a stabilizing role for the economy in the event of monetary shocks. Key words: New open-economy macroeconomics, Monetary shocks, Dollarization, Factor price rigidities, Nontradeables, Current Account
  • Heimonen, Kari (2001)
    BOFIT Discussion Papers 11/2001
    This study evaluates substitution of foreign currency balances in Estonia, a transition economy neighbouring countries participating in EMU.The focus is on substitution between dollar and euro balances in the three basic functions of money - unit of account, store of value and means of payment.While traditional models for currency substitution concentrate on substitution between a domestic currency and aggregate foreign currency balances, we look for substitution between the dollar and the euro or euro-related foreign currency balances.We find substitution between dollarization and euroization to be asymmetric in the short run, which suggests that inertia, irreversibility and ratchet effects favour the euro.No significant evidence of asymmetries in the long run was detected.In general, the traditional model for currency substitution explains the dynamics of the euro and dollar as substitute foreign currencies.