Komárek, Luboš and Melecky, Martin (2001) Currency substitution in the transition economy: a case of the Czech Republic 1993-2001. Working Paper. University of Warwick, Department of Economics, Coventry.

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Abstract

Currency substitution appears to be an important issue affecting the design of monetary policy, especially in transition economies. Therefore, this paper strives to analyze the particular relevance of a currency substitution phenomenon for the Czech Republic is case. We initially discuss various approaches and definitions of currency substitution that found in the literature. Subsequently, we discuss the role of currency substitution in small open economies in transition with some illustrations relating to the Czech Republic - we distinguish and analyse a locally and globally substituting currency from a substituted one and consequences of euroization. The empirical part of this paper presents estimations of modified Branson and Henderson portfolio model for the Czech Republic’s case. This provides a multi-perspective approach to currency substitution in a broad sense. Further, we attempt to intensify the robustness of our estimation, applying several cointegration techniques. These are namely the Johansen procedure, the ARDL, the DOLS and the ADL. Finally, we discuss potential implications of currency and assets substitution according to our estimates present in the Czech economy.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HG Finance
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Currency substitution -- Czechy Republic, Demand for money -- Czech Republic, Money -- Czech Republic, Development economics -- Czech Republic, Czech Republic -- Economic conditions -- 1993-
Series Name:	Warwick economic research papers
Publisher:	University of Warwick, Department of Economics
Place of Publication:	Coventry
Date:	November 2001
Number:	No.613
Number of Pages:	37
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
Funder:	Grantová agentura České republiky [Grant Agency of the Czech Republic] (GACR)
Grant number:	402/00/1213 (GACR)
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URI:	http://wrap.warwick.ac.uk/id/eprint/1573

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