IMF Working Papers

Currency Substitution: The Recent Experience of Bolivia

By Benedict J. Clements, Gerd Schwartz

August 1, 1992

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Format: Chicago

Benedict J. Clements, and Gerd Schwartz. Currency Substitution: The Recent Experience of Bolivia, (USA: International Monetary Fund, 1992) accessed November 21, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper analyzes the determinants of currency substitution in Bolivia in the period following the 1984/85 hyperinflation. We find that expected exchange rate depreciation and actual interest rate differentials between boliviano and dollar deposits in the Bolivian banking system are statistically significant determinants of the degree of currency substitution. However, the explanatory power of these variables is low compared to variables that measure the degree of inertia in the currency substitution process. Thus, further reductions in inflation or higher interest rates for boliviano bank deposits are likely to have but a small effect on dollarization.

Subject: Bank deposits, Currencies, Dollarization, Exchange rates, Financial services, Foreign exchange, Inflation, Monetary policy, Money, Prices

Keywords: Bank deposits, Bolivia, Bolivia foreign currency deposit, Currencies, Dollar, Dollar deposit, Dollar-denominated asset, Dollarization, Dollarization process, Exchange rate, Exchange rates, Foreign currency, Inflation, Money balance, Quasi money deposit, Quasi-money deposit, U.S. dollar, WP, Yield

Publication Details

  • Pages:

    32

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 1992/065

  • Stock No:

    WPIEA0651992

  • ISBN:

    9781451848618

  • ISSN:

    1018-5941

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