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Determinants of Currency Substitution/Dollarization – The Case of the Republic of Serbia

Author

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  • Ivan Milenković

    (University of Priština, Faculty of Economics Kosovska Mitrovica, Associate Professor and University of Novi Sad, Faculty of Economics Subotica, Assistant Professor)

  • Milivoje Davidović

    (University of Novi Sad,Faculty of Economics Subotica, Teaching Assistant)

Abstract

Currency substitution/dollarization is a serious limiting factor for effective monetary policy, especially in transition economies. In addition, there is a negative impact of currency substitution on the banking industry, which is visible in the eroding quality of its lending due to indexation in debts of firms and individuals in foreign currency. Therefore, this paper analyzes the particular relevance of a currency substitution/dollarization phenomenon(s) in the case of the Republic of Serbia. We initially discuss various approaches and definitions of currency substitution and dollarization that found in the literature. Subsequently, we discuss the role of currency substitution in small and open economies in transition with some illustrations relating to the Republic of Serbia - we distinguish and analyze a locally and globally substituting currency from the substituted one and the consequences of euroization.

Suggested Citation

  • Ivan Milenković & Milivoje Davidović, 2013. "Determinants of Currency Substitution/Dollarization – The Case of the Republic of Serbia," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 2(1), pages 139-155.
    • Handle: RePEc:cbk:journl:v:2:y:2013:i:1:p:139-155
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    References listed on IDEAS

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    1. Elisabeth Beckmann & Thomas Scheiber, 2012. "Not So Trustworthy Anymore? The Euro as a Safe Haven Asset in Central, Eastern and Southeastern Europe," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 65-71.
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    7. Stephanie Schmitt-Grohe & Martin Uribe, 2001. "Stabilization policy and the costs of dollarization," Proceedings, Federal Reserve Bank of Cleveland, pages 482-517.
    8. SAWADA Yasuyuki & Pan A. YOTOPOULOS, 2001. "Currency Substitution, Speculation and Crises: Theory and Empirical Analysis," ESRI Discussion paper series 007, Economic and Social Research Institute (ESRI).
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    10. Edgar L. Feige & Michael Faulend & Velimir Sonje & Vedran Sosic, 2001. "Currency Substitution, Unoffical Dollarization and Estimates of Foreign Currency Held Abroad: The Case of Croatia," International Finance 0106001, University Library of Munich, Germany.
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    Cited by:

    1. Anthony E. Akinlo, 2022. "How Does Corruption Affect Currency Substitution? Evidence from Nigeria," Journal of Development Policy and Practice, , vol. 7(2), pages 221-242, July.

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    More about this item

    Keywords

    currency substitution; dollarization; Serbia;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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