Network Externalities and Dollarization Hysteresis: The Case of Russia

 
Author/Editor: Oomes, Nienke
 
Publication Date: May 01, 2003
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: Dollarization in Russia increased rapidly during the early 1990s, but failed to come down in the second half of the 1990s in spite of exchange rate stabilization. To explain this "dollarization hysteresis," this paper develops a model in which network externalities in the demand for currency can generate multiple stable steady states for the dollarization ratio. The model is estimated using a new source of data on dollar currency holdings in Russia. On the basis of these estimates, which confirm the existence of network externalities, the paper discusses several policies that could result in a permanent decrease in dollarization.
 
Series: Working Paper No. 03/96
Subject(s): Dollarization | Russian Federation | Currency substitution | Economic models

Author's Keyword(s): Dollarization | currency substitution | ratchet effect | network externalities | Russia
 
English
Publication Date: May 01, 2003
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA0962003 Pages: 35
Price:
US$15.00 (Academic Rate:
US$15.00 )
 
 
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