BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 11/2001:
Substituting a Substitute Currency – The Case of Estonia
Kari Heimonen ()
Abstract: This study evaluates substitution of foreign currency
balances in Estonia, a transition economy neighbouring countries
participating in EMU. The focus is on substitution between dollar and euro
balances in the three basic functions of money - unit of account, store of
value and means of payment. While traditional models for currency
substitution concentrate on substitution between a domestic currency and
aggregate foreign currency balances, we look for substitution between the
dollar and the euro or euro-related foreign currency balances. We find
substitution between dollarization and euroization to be asymmetric in the
short run, which suggests that inertia, irreversibility and ratchet effects
favour the euro. No significant evidence of asymmetries in the long run was
detected. In general, the traditional model for currency substitution
explains the dynamics of the euro and dollar as substitute foreign
currencies.
Keywords: euro; dollar; currency substitution; currency demand; (follow links to similar papers)
71 pages, October 16, 2001
Before downloading any of the electronic versions below
you should read our statement on
copyright.
Download GhostScript
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
dp1101.pdf 
Download Statistics
Questions (including download problems) about the papers in this series should be directed to Päivi Määttä ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Programing by
Design by Joachim Ekebom
