Financial sector development and the macrodynamics of ‘de facto’ dollarisation in developing countries: the case of Ghana
Deodat Adenutsi and
Charles A. Yartey
MPRA Paper from University Library of Munich, Germany
Abstract:
Following the massive economic policy restructuring and reforms since the early 1980s, currency substitution, asset substitution and de facto dollarisation have become common phenomena in nearly all transition and developing economies. High and persistent inflation which have been a perennial feature of developing and transition economies is now known to be highly responsible for currency substitution, asset substitution and de facto dollarisation. This paper presents evidence on the macrodynamics of de facto dollarisation, currency substitution and asset substitution during the era of the implementation of the Financial Sector Adjustment Programmes (FINSAPs) in developing and transition economies with special reference to Ghana. The study has found out that de facto dollarisation whether in the form of asset substitution or currency substitution is highly prevalent and poses a serious threat to fiscal and monetary policies effectiveness in developing and transition economies. In Ghana, the principal long-run mainspring of de facto dollarisation is the ad hoc implementation of financial sector development programme that was embarked upon about two decades ago which has resulted in high exchange rate depreciation and price fluctuations. It is, however, likely that as the financial sector develops over a long period a time will come when further development of the financial sector would no longer instigate de facto dollarisation.
Keywords: Currency Substitution; Asset Substitution; Dollarisation; Financial Sector Development (search for similar items in EconPapers)
JEL-codes: E58 G0 (search for similar items in EconPapers)
Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)
Downloads: (external link)
https://mpra.ub.uni-muenchen.de/29333/1/MPRA_paper_29333.pdf original version (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:29333
Access Statistics for this paper
More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().