2003
DOI: 10.1111/1467-8268.00058
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Exchange Rate Policy and Currency Substitution: The Case of Africa's Emerging Economies

Abstract: This paper examines the dynamic of currency substitution (CS) in Egypt and South Africa. The study also assesses the causal relationships of this phenomenon. There are three main CS-related differences between the two countries. These are (1) the orientation of economic policy, (2) the degree and level of CS, and (3) the trend of CS. During the study period 1991-2001, Egypt used the exchange rate as an anchor to its economic programme. While in the case of South Africa, the authorities directly targeted inflat… Show more

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Cited by 12 publications
(15 citation statements)
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“…Estimates for foreign currency holding, ̺, range from 0.27 to 0.32. This is similar to the findings by Elkhafif (2002).…”
Section: Prior Distribution and Calibration Of The Parameterssupporting
confidence: 92%
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“…Estimates for foreign currency holding, ̺, range from 0.27 to 0.32. This is similar to the findings by Elkhafif (2002).…”
Section: Prior Distribution and Calibration Of The Parameterssupporting
confidence: 92%
“…Given the importance of foreign currency holdings by African households as noted by Elkhafif (2002) and Adom et al (2008), we assume that households allocate their real holdings between domestic and foreign currencies. For simplicity, we assume this allocation to be in fixed proportions, so that S t M * t = ̺M t , where S t is the nominal exchange rate, M * t is foreign nominal money and M t is domestic nominal money.…”
Section: Householdsmentioning
confidence: 99%
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“…Therefore, we see a positive relationship between the interest rate differential and the demand for foreign exchange in the long run. This finding is similar to that in South Africa by Elkhafif () and that in Turkey by Us (), who use similar empirical models.…”
Section: Resultssupporting
confidence: 90%
“…Similar to Castelnuovo (), this paper employs a DSGE model with non‐separable money in the utility function. As noted by Elkhafif () and Rasaki and Malikane (), we assume that households allocate their real holdings between domestic and foreign currencies. We assume this to be in fixed proportions, hence StMt=ϱMt, where St is the nominal exchange rate, Mt is foreign nominal money and Mt is domestic nominal money.…”
Section: The Modelmentioning
confidence: 99%