{
  "title": "Network Externalities and Dollarization Hysteresis: The Case of Russia",
  "publication": "IMF Working Papers, May 1, 2003",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/30/network-externalities-and-dollarization-hysteresis-the-case-of-russia-16475",
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  "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.",
  "sections": [
    {
      "heading": "Summary and central finding",
      "content": "- 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.\n- The paper develops a model in which network externalities in the demand for currency can generate multiple stable steady states for the dollarization ratio, providing an explanation for the observed \"dollarization hysteresis.\"\n- The model is estimated using a new source of data on dollar currency holdings in Russia.\n- The estimates confirm the existence of network externalities.\n- On the basis of these estimates, the paper discusses several policies that could result in a permanent decrease in dollarization."
    },
    {
      "heading": "Model and mechanism",
      "content": "- Network externalities in the demand for currency can produce multiple stable steady states for the dollarization ratio.\n- The multiple steady states mechanism explains how high-dollarization equilibria can persist even after exchange rate stabilization."
    },
    {
      "heading": "Data and estimation",
      "content": "- Estimation relies on a new source of data on dollar currency holdings in Russia.\n- Empirical estimates confirm the presence of network externalities affecting currency demand and dollarization dynamics."
    },
    {
      "heading": "Policy discussion and implications",
      "content": "- The paper discusses several policies that could lead to a permanent decrease in dollarization (specific policy measures are evaluated on the basis of the model estimates and the confirmed network externalities).\n- Policy design should account for network externalities and the possibility of multiple stable equilibria when aiming to reduce dollarization permanently.\n\n---\n\n Content in this bundle\n\n- Network Externalities and Dollarization Hysteresis: The Case of Russia - ISCR/03/96\n  - Network Externalities and Dollarization Hysteresis: The Case of Russia - ISCR/03/96 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Network Externalities and Dollarization Hysteresis: The Case of Russia - ISCR/03/96 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/network-externalities-and-dollarization-hysteresis-the-case-of-russia-16475"
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    "Authors: Nienke Oomes",
    "Published: May 1, 2003",
    "Series: IMF Working Papers",
    "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.",
    "The paper develops a model in which network externalities in the demand for currency can generate multiple stable steady states for the dollarization ratio, providing an explanation for the observed \"dollarization hysteresis.\"",
    "The model is estimated using a new source of data on dollar currency holdings in Russia.",
    "The estimates confirm the existence of network externalities.",
    "On the basis of these estimates, the paper discusses several policies that could result in a permanent decrease in dollarization.",
    "Network externalities in the demand for currency can produce multiple stable steady states for the dollarization ratio.",
    "The multiple steady states mechanism explains how high-dollarization equilibria can persist even after exchange rate stabilization.",
    "Estimation relies on a new source of data on dollar currency holdings in Russia.",
    "Empirical estimates confirm the presence of network externalities affecting currency demand and dollarization dynamics.",
    "The paper discusses several policies that could lead to a permanent decrease in dollarization (specific policy measures are evaluated on the basis of the model estimates and the confirmed network externalities).",
    "Policy design should account for network externalities and the possibility of multiple stable equilibria when aiming to reduce dollarization permanently.",
    "**Network Externalities and Dollarization Hysteresis: The Case of Russia - ISCR/03/96**"
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