Overshooting and Dollarization in the Democratic Republic of the Congo

Author/Editor:

Philippe Beaugrand

Publication Date:

May 1, 2003

Electronic Access:

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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:

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.

Series:

Working Paper No. 2003/105

Subject:

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

English

Publication Date:

May 1, 2003

ISBN/ISSN:

9781451852844/1018-5941

Stock No:

WPIEA1052003

Pages:

27

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