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Dollarization and Euroization in Transition Countries: Currency Substitution, Asset Substitution, Network Externalities and Irreversibility

Edgar Feige () and James Dean
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James Dean: Simon Fraser University

International Finance from University Library of Munich, Germany

Abstract: We examine the extent, causes and consequences of transition countries’ use of foreign currency as a co-circulating medium of exchange and store of value. Using new estimates of foreign cash in circulation, we obtain unique measures of currency substitution, asset substitution, and dollarization, and examine the consequences of network externalities for hysteresis and irreversibility. Finally, we examine factors leading some transition countries to euroize officially and bilaterally, and others to euroize unilaterally - that is, without prior sanction by the EMU.

Keywords: dollarization; euroization; transition economies; currency substitution; asset substitution; foreign currency; network externalities; irreversibility; underground economy (search for similar items in EconPapers)
JEL-codes: E4 E5 F3 H26 K42 P2 P3 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn and nep-law
Date: 2002-05-10
Note: Type of Document - PDF; prepared on IBM PC ; to print on HP/PostScript; pages: 27 ; figures: included. Presented at the Fordham University International Conference on “Euro and Dollarization: Forms of Monetary Union in Integrating Regions” April 5 - 6, 2002, New York
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