Overshooting and Dollarization in the Democratic Republic of the Congo

May 1, 2003

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Format: Chicago

Philippe Beaugrand. Overshooting and Dollarization in the Democratic Republic of the Congo, (USA: International Monetary Fund, 2003) accessed October 6, 2024

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

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.

Subject: Currencies, Demand for money, Dollarization, Exchange rates, Foreign exchange, Inflation, Monetary policy, Money, Prices

Keywords: Central Africa, Congo, Currencies, Currency, Currency depreciation, Demand for money, Democratic Republic of, Dollarization, Dollarization rate, Dollarization ratio, Exchange rate depreciation, Exchange rates, Foreign currency, Inflation, Inflation expectation, Money balance, Overshooting, Sub-Saharan Africa, WAEMU currency zone, WP, Zaïre

Publication Details

Pages:

27
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2003/105
Stock No:

WPIEA1052003
ISBN:

9781451852844
ISSN:

1018-5941

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