Rachet Effects in Currency Substitution: An Application to the Kyrgyz Republic

Joannes Mongardini and Johannes Mueller

No 1999/102, IMF Working Papers from International Monetary Fund

Abstract: Currency substitution is now a common issue in the design of monetary policy in most transition economies. This paper analyzes the persistence of this phenomenon in the Kyrgyz Republic by including a ratchet variable in the model specification. The main conclusion of the paper is that, while some degree of persistence is present in the allocation of bank deposit, currency substitution in the economy at large has not yet reached a point where reversing it would be difficult. In this regard, there is still room for monetary policy to influence currency allocation in the private sector.

Keywords: WP; ratchet effect; ratio; currency substitution; ratchet effects; monetary policy; CS ratio; management technique; CS process; U.S. dollar; depreciation rate; CS definition; Currencies; Dollarization; Depreciation; Inflation; Commercial banks (search for similar items in EconPapers)
Pages: 23
Date: 1999-07-01
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Citations: View citations in EconPapers (5)

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