Determinants of Currency Substitution/Dollarization – The Case of the Republic of Serbia

Ivan Milenković () and Milivoje Davidović ()
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Ivan Milenković: University of Priština, Faculty of Economics Kosovska Mitrovica, Associate Professor and University of Novi Sad, Faculty of Economics Subotica, Assistant Professor
Milivoje Davidović: University of Novi Sad,Faculty of Economics Subotica, Teaching Assistant

Journal of Central Banking Theory and Practice, 2013, vol. 2, issue 1, 139-155

Abstract: Currency substitution/dollarization is a serious limiting factor for effective monetary policy, especially in transition economies. In addition, there is a negative impact of currency substitution on the banking industry, which is visible in the eroding quality of its lending due to indexation in debts of firms and individuals in foreign currency. Therefore, this paper analyzes the particular relevance of a currency substitution/dollarization phenomenon(s) in the case of the Republic of Serbia. We initially discuss various approaches and definitions of currency substitution and dollarization that found in the literature. Subsequently, we discuss the role of currency substitution in small and open economies in transition with some illustrations relating to the Republic of Serbia - we distinguish and analyze a locally and globally substituting currency from the substituted one and the consequences of euroization.

Keywords: currency substitution; dollarization; Serbia (search for similar items in EconPapers)
JEL-codes: E42 F31 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:cbk:journl:v:2:y:2013:i:1:p:139-155

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