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Dollarization, Seigniorage, and Prices: The Case of North Korea

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  • Seung-Ho Jung
  • Ohik Kwon
  • Sung Min Mun

Abstract

This study employs a general equilibrium monetary search model to examine the effects of the recent dollarization in North Korea on seigniorage and prices. Maximum seigniorage is generated at a high rate of money growth when dollarization is mild. However, under a high degree of dollarization seigniorage declines sharply when the money growth rate is high. Accordingly, seigniorage can be increased by de-dollarizing the economy through lowering the money growth rate. This finding implies that the post-2013 price stabilization may be a result of the restriction on printing of money with the aim of increasing seigniorage. This finding also recognizes that the North Korean authorities have little room for maneuver on monetary policy under the conditions of widespread dollarization.

Suggested Citation

  • Seung-Ho Jung & Ohik Kwon & Sung Min Mun, 2017. "Dollarization, Seigniorage, and Prices: The Case of North Korea," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 53(11), pages 2463-2475, November.
    • Handle: RePEc:mes:emfitr:v:53:y:2017:i:11:p:2463-2475
    DOI: 10.1080/1540496X.2017.1344833
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