## Overshooting and Dollarization in the Democratic Republic of the Congo

_IMF Working Papers, May 1, 2003_

## Source details

**Canonical URL:** [Overshooting and Dollarization in the Democratic Republic of the Congo](https://www.imf.org/en/publications/wp/issues/2016/12/30/overshooting-and-dollarization-in-the-democratic-republic-of-the-congo-16544)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/30/overshooting-and-dollarization-in-the-democratic-republic-of-the-congo-16544/index.md)
- [Structured JSON version](/en/publications/wp/issues/2016/12/30/overshooting-and-dollarization-in-the-democratic-republic-of-the-congo-16544/index.json)
- [Bundle manifest](/en/publications/wp/issues/2016/12/30/overshooting-and-dollarization-in-the-democratic-republic-of-the-congo-16544/bundle-manifest.json)

## Bibliographic details
- Authors: Philippe Beaugrand
- Published: May 1, 2003
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451852844.001

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### 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 treated 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.

### Model and empirical approach
- Uses a simple calibrated model tailored to the Democratic Republic of the Congo in the 1990s.
- Interprets exchange rate over- or undershooting relative to inflation as indicating shifts in money demand between domestic and foreign currency.
- Calibration is employed to translate observed inflation–depreciation differences into estimates of dollarization.

### Key findings and estimates
- Volatile exchange rate movements in a highly dollarized, high-inflation environment can be explained by relative demand shifts for domestic versus foreign currency.
- The model is used to derive estimates of the rate of dollarization for the Democratic Republic of the Congo in the 1990s.
- (No numeric dollarization estimates are reported on this page; see the Working Paper for detailed quantitative results.)

### Policy relevance and themes
- Addresses implications for monetary policy in dollarized economies experiencing very high inflation.
- Relevant subject areas: Currencies; Demand for money; Dollarization; Exchange rates; Foreign exchange; Inflation; Monetary policy; Money; Prices.
- Regional and topical focus includes: Central Africa; Congo; Sub-Saharan Africa; WAEMU currency zone; Zaïre.

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## Content in this bundle

- **Overshooting and Dollarization in the Democratic Republic of the Congo - WP/03/105**
  - [Overshooting and Dollarization in the Democratic Republic of the Congo - WP/03/105 (Markdown version)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2003/_wp03105.pdf.md){rel="alternate" type="text/markdown"}
  - [Overshooting and Dollarization in the Democratic Republic of the Congo - WP/03/105 (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2003/_wp03105.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/overshooting-and-dollarization-in-the-democratic-republic-of-the-congo-16544_