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Money Demand and Inflation in Dollarized Economies; The Case of Russia

Franziska Ohnsorge and Nienke Oomes ()

No 05/144, IMF Working Papers from International Monetary Fund

Abstract: Money demand in dollarized economies often appears to be highly unstable, making it difficult to forecast and control inflation. In this paper, we show that a stable money demand function for Russia can be found for "effective broad money," which includes an estimate of foreign cash holdings. Moreover, we find that an excess supply of effective broad money is inflationary, while other excess money measures are not, and that effective broad money growth has the strongest and most persistent effect on short-run inflation.

Keywords: Dollarization; Demand for money; Currency substitution; Money demand; Foreign exchange; Inflation; Russian Federation; Russia, foreign currency, money growth, money supply, (search for similar items in EconPapers)
Pages: 30
Date: 2005-07-01
New Economics Papers: this item is included in nep-cba, nep-cis, nep-mac, nep-mon and nep-tra
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