Money Demand and Inflation in Dollarized Economies: The Case of Russia
July 1, 2005
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Summary
Money demand in dollarized economies often appears to be highly unstable, making it difficult to forecast and control inflation. In this paper, we show that a stable money demand function for Russia can be found for "effective broad money," which includes an estimate of foreign cash holdings. Moreover, we find that an excess supply of effective broad money is inflationary, while other excess money measures are not, and that effective broad money growth has the strongest and most persistent effect on short-run inflation.
Subject: Currencies, Demand for money, Inflation, Monetary aggregates, Monetary base
Keywords: broad money, money demand, ruble, WP
Pages:
30
Volume:
2005
DOI:
Issue:
144
Series:
Working Paper No. 2005/144
Stock No:
WPIEA2005144
ISBN:
9781451861631
ISSN:
1018-5941
