Currency substitution and seigniorage-maximizing inflation: the case of Cambodia

Samreth, Sovannroeun

doi:10.1080/00036840701749035

Cited by 9 publications

(5 citation statements)

References 13 publications

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“…In addition, the high share of foreign currency in the domestic market reduces government's ability to gain seignorage revenue concluding that Cambodian government has little opportunity to gain from seigniorage revenue (Samreth, 2010). This is due to that the majority of the local transactions are taken place in US Dollar.…”

Section: Resultsmentioning

confidence: 96%

Dollarization in East Africa: Causes, Consequences, and Future Forecasts

Musse

Echchabi²

2017

Binus Business Review

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The dollarization phenomenon has been widespread among the East African countries for many decades. This trend results in several consequences that might be either beneficial or harmful to these countries and their likes. The objective of this research was to empirically examine the causes, consequences and the future scenarios of dollarization in one of the leading regional countries such as Somalia. The research used a survey of over 100 respondents and applied descriptive statistics and t-tests to achieve the above objectives. The findings show that the main causes of Dollarization in Somalia are the implementation of the Hawallah (money transfer) system, the remarkable absence of the central bank and other monitoring financial authorities, the increasing exports and imports of the Somalian economy, the loss of confidence in the local Somalian Shilling, and the relative ease at which the Somalian Shilling can be printed and manipulated by selected market players. These causes are found to be mainly triggered by the revenue from exports, the policies and regulations implemented by the Somali government, the Somali Diaspora, and the international aid organizations. This has resulted in the foreign traders buying Somali goods at a relatively lower price and taking advantage of the depreciated Somali Shilling against most international currencies.

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Section: Resultsmentioning

confidence: 96%

Dollarization in East Africa: Causes, Consequences, and Future Forecasts

Musse

Echchabi²

2017

Binus Business Review

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“…Moreover, dollarization caused a large seigniorage loss; which is estimated up to US$682 million from 1992 to 2004 and with an additional loss of US$61 million annually for every following year in Cambodia (Kang, 2005). In addition, the high share of foreign currency in the domestic market reduces government's ability to gain seignorage revenue concluding that Cambodian government has little opportunity to gain from seigniorage revenue (Samreth, 2010). This is due to that the majority of the local transactions are taken place in US Dollar.…”

Section: The Effects Of Dollarization On Local Currencymentioning

confidence: 99%

The Effects of Dollarization on Local Currency in Somalia

Mohamoud

2023

MJHIU

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This study focused on the effects of dollarization on local currency (Somali Shilling) in Somalia. The study employed quantitative research method. The study adopted descriptive research design to assess the effects of dollarization on local currency in Somalia. The researcher collected the data through documentary review of several articles, books and journals in relation to the effects of dollarization on local currency in Somalia. The key findings the effects of dollarization on local currency in Somalia encompass: dollarization leads to local currency depreciation and shortages in Somalia, dollarization increases the rate of foreign exchange on local currency and inflation rate and dollarization weakens the local financial institutions, which creates lack of financial control in the economy by the government authority leading to financial instability. The study recommended that, the Central Bank of Somalia, and Parliament of the Federal Republic of Somalia should introduce new regulation to regulate finance in the economy, new policy on financial control, introduce financial reform and review business models in the sphere of finance in Somalia to curb the increasing devastating effects of dollarization on local currency in Somalia.

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“…Some of them have focused on discussing its causes (Zamaróczy and Sa, 2002;Menon, 2008;Duma, 2011) and on analyzing the factors leading to the substitution between foreign and domestic currencies that reinforce the dollarization process (Kem, 2001;Ra, 2008;Samreth, 2010Samreth, , 2011Siregar and Chan, 2014). Other studies discuss and analyze the negative impacts of dollarization by focusing on its negative effects on seigniorage (Zamaróczy and Sa, 2002;Kang, 2005;Samreth, 2010). However, other dimensions of costs and benefits of dollarization in Cambodia have not been addressed sufficiently.…”

Section: Literature Reviewmentioning

confidence: 99%

“…In the late 1980s and early 1990s, Cambodia relied on monetization to fund its fiscal deficit, which resulted in hyperinflation at a time when the country was transitioning from a centrally planned to market economy. Macroeconomic instability coupled with political transition contributed to a rapid depreciation of the local currency, the Khmer riel (KHR), which encouraged Cambodians to start substituting other currencies as a store of value (Kem, 2001;Zamaróczy and Sa, 2002;Samreth, 2010). The arrival of the United Nations Transitional Authority in Cambodia (UNTAC) in 1992 and the opening to foreign aid and investors resulted in large inflows of US dollars (USD), which circulated freely as the authorities were not well prepared to handle the influx.…”

Section: Introductionmentioning

confidence: 99%

Dollarization Dilemma: Price Stability at the Cost of External Competitiveness in Cambodia

Samreth¹,

Martín²,

Ly³

2019

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Cambodia has recorded both rapid economic growth and macroeconomic stability in recent decades despite (or thanks to) high levels of dollarization. Previous studies on dollarization in Cambodia have largely focused on examining its causes and estimating seigniorage losses. As an attempt to further explore the effects of dollarization in Cambodia, this paper examines its impact on the competitiveness of the export sector. The main results, based on a vector autoregression estimation of quarterly data over 1994Q4-2016Q4, indicate that a positive US interest rate shock has a negative impact on Cambodia's trade balance with the European Union, its main trading partner, as it leads to appreciation of the US dollar. Furthermore, this shock also leads to a significant decrease in Cambodia's international reserve levels during the first two quarters following the shock. The surrendering of monetary and exchange rate independence seems to affect the competitiveness of the tradable sector negatively as well as exacerbate financial sector vulnerability to solvency and liquidity risks.

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Currency substitution and seigniorage-maximizing inflation: the case of Cambodia

Cited by 9 publications

References 13 publications

Dollarization in East Africa: Causes, Consequences, and Future Forecasts

Dollarization in East Africa: Causes, Consequences, and Future Forecasts

The Effects of Dollarization on Local Currency in Somalia

Dollarization Dilemma: Price Stability at the Cost of External Competitiveness in Cambodia

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