Making Monetary Policy More Effective: The Case of the Democratic Republic of the Congo

Fischer, Felix; Lundgren, Charlotte; Jahjah, Samir

doi:10.2139/ssrn.2365864

Cited by 2 publications

(1 citation statement)

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“…Secondly, a high degree of dollarization has been closely correlated with unstable and high inflation, exchange rate volatility and lack of monetary policy discipline as Rennhack and Nozaki (2006) point out. Thirdly, a high degree of dollarization can leave an economy more vulnerable to economic crises according to De Nicolo, Honohan, and , Fischer, Lundgren, and Jahjah (2013) and Yeyati (2006). And finally, Ize and Yeyati (2005) and Leiderman, Maino, and Parrado (2006) argue that dollarization can deepen the transmission channels running from the foreign exchange rate to inflation and subsequently, the fluctuations of inflation can be more easily exposed to external factors than internal factors.…”

Section: Introductionmentioning

confidence: 99%

Dollarization, inflation and foreign exchange markets: A cross‐country analysis

Park

Son

2020

Int. J Fin Econ

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This article investigates determinants of deepening dollarization and the relationship between exchange rate and inflation across foreign exchange regimes and degrees of dollarization. To this end, the fixed effect models are adopted using 28 country-level panel incorporating countries that have experienced dollarization from 1995 to 2016. The overall estimation results show that first, high inflation, less flexible exchange rate movements, the sluggish real economy and the inadequacy of the institutional environments are contributing factors to intensify the dollarization. Secondly, the estimation results using the de-dollarization country group indicates that real appreciation of the domestic currency is an important factor in mitigating the degree of dollarization while the increasing effects of inflation on dollarization are more pronounced in the dollarized economies. Finally, high dollarization or a high depreciation rate of the domestic currency tends to increase inflation, and those effects are found to have more significant in the dollarized economies, while real depreciation is a factor contributing to lowering inflation.

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Section: Introductionmentioning

confidence: 99%

Dollarization, inflation and foreign exchange markets: A cross‐country analysis

Park

Son

2020

Int. J Fin Econ

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Döviz Piyasası Baskı Endeksi ve Dolarizasyon Arasındaki İlişki: Türkiye Örneği

Konat

TAŞ

BAYAT

2022

Cumhuriyet Üniversitesi İktisadi Ve İdari Bilimler Dergisi

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Any prolonged pressure on the national currency can have serious consequences, especially for emerging economies that are prone to external shocks. It is important to know the timing and intensity of such pressures in order to avoid any crisis. In this context, especially in economies that follow the managed floating exchange rate system, the foreign exchange market pressure index is used in the literature in order to accurately determine the level of pressure on the national currency which is measured by the weighted sum of changes in exchange rates, foreign exchange reserves and/or interest rates. In this study, the relationship between the foreign exchange market pressure index, which signals a possible currency crisis in the Turkish economy in the period of 2005:12-2021:5, and dollarization, which is expressed as the intensive use of foreign currency as both a payment instrument and a store of value, is examined in the Fourier field. For the dollarization variable, the ratio of exchange deposit accounts to the M2 money supply is taken as a basis, and for the exchange market pressure index, in parallel with the studies in the literature, the weighted sum of the change in the nominal exchange rate (USD/Turkish Lira) and the CBRT gross foreign exchange reserves (Million USD) is used. The monthly data of the said variables were obtained from the CBRT official database. As a result of the empirical analysis, it has been concluded that there is a process that feeds each other between the foreign exchange market pressure index and dollarization.

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Making Monetary Policy More Effective: The Case of the Democratic Republic of the Congo

Cited by 2 publications

References 6 publications

Dollarization, inflation and foreign exchange markets: A cross‐country analysis

Dollarization, inflation and foreign exchange markets: A cross‐country analysis

Döviz Piyasası Baskı Endeksi ve Dolarizasyon Arasındaki İlişki: Türkiye Örneği

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