Front Matter Page
Research Department
Authorized for distribution by Ashoka Mody
Contents
I. Introduction
II. Dollarization Hysteresis
A. Evidence
B. Explaining Hysteresis
C. Network Externalities
III. The Model
A. Setup and Main Assumptions
B. Best Response Functions
C. Expectations
D. Steady States and Dynamics
IV. Empirical Estimation
A. Estimation Procedure
B. Data
C. Results
D. Interpretation
V. Policy Implications
A. Exchange Rate Policy
B. Fiscal Policy
C. Enforcement Policy
VI. Conclusion
Appendix
I. Estimating Dollar Currency in Russia
Tables
1. Cost Matrix for Agent i
2. Estimated Parameters and Standard Errors
3. Goodness of Fit and Residual Tests
Figures
1. Dollarization in Russia, 1992-98
2. Currency Dollarization in Russia, 1992-99
3. Dollarization Dynamics
4. Estimated and Actual Relationship Between pt and pt-1 (a)
5. Estimated and Actual Relationship Between pt and pt-1 (b)
6. Reducing Dollarization by Temporary Appreciation
7. Reducing Dollarization by Eliminating the Foreign-Currency Tax
Appendix Table
4. Financial Assets of Russian Households, 1996
Appendix Figures
8. Two Estimates of Dollarization in Russia, 1992-99
References