Dollarization in Cambodia: Causes and Policy Implications

 
Author/Editor: Duma, Nombulelo
 
Publication Date: March 01, 2011
 
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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: Over the past decade, Cambodia has become Asia’s most dollarized economy. In contrast, dollarization in neighboring Lao P.D.R., Mongolia, and Vietnam has been either declining or broadly stable. Somewhat paradoxically, growing dollarization in Cambodia has occurred against the backdrop of greater macroeconomic and political stability. The usual motive, currency substitution, does not appear to have been a factor. As the volume of dollars increased over the years, so has the volume of riel. A strong inward flow of dollars related to garments sector exports, tourism receipts, foreign direct investment, and aid, has benefitted the dollar based urban economy. The riel based rural economy has, however, lagged behind. Given international experience in de-dollarization, a carefully managed market based strategy, supported by a continued stable macroeconomic environment is essential for Cambodia’s de-dollarization.
 
Series: Working Paper No. 11/49
Subject(s): Cambodia | Dollarization | Economic models | Monetary policy | Political economy | Reserves

Author's Keyword(s): Dollarization | Cambodia | seigniorage | vector autoregression
 
English
Publication Date: March 01, 2011
Format: Paper
Stock No: WPIEA2011049 Pages: 25
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
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