Overshooting and Dollarization in the Democratic Republic of the Congo

Philippe Beaugrand

No 2003/105, IMF Working Papers from International Monetary Fund

Abstract: The paper develops an interpretation of volatile exchange rate movements in a dollarized economy with very high rates of inflation. Differences between the rate of inflation and currency depreciation (over- or undershooting of the exchange rate) are seen as a proxy for changes in the relative demand for domestic and foreign currency. A simple model is calibrated for the Democratic Republic of the Congo in the 1990s and is used to derive estimates of the rate of dollarization.

Keywords: WP; foreign currency; currency; Overshooting; Dollarization; Congo; Democratic Republic of; Zaïre; dollarization rate; currency depreciation; WAEMU currency zone; money balance; inflation expectation; dollarization ratio; exchange rate depreciation; Currencies; Inflation; Exchange rates; Demand for money; Sub-Saharan Africa; Central Africa (search for similar items in EconPapers)
Pages: 27
Date: 2003-05-01
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Citations: View citations in EconPapers (2)

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