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Currency substitution and seigniorage-maximizing inflation: the case of Cambodia

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  • Sovannroeun Samreth

Abstract

This article contributes a new empirical study on currency substitution in Cambodia. In our analysis, a model of money-in-the-utility function is adopted. The empirical results indicate that the elasticity of substitution between foreign and domestic real currency balances in Cambodia is high. Moreover, the high share of foreign real balances in providing domestic liquidity services in Cambodia is also confirmed by empirical analysis. Given these findings, the effects of the currency substitution on the government ability to gain from seigniorage revenue are also examined. The analysis from simulated results shows that the Cambodian government has little opportunity to gain from seigniorage revenue.

Suggested Citation

  • Sovannroeun Samreth, 2010. "Currency substitution and seigniorage-maximizing inflation: the case of Cambodia," Applied Economics, Taylor & Francis Journals, vol. 42(15), pages 1907-1916.
    • Handle: RePEc:taf:applec:v:42:y:2010:i:15:p:1907-1916
    DOI: 10.1080/00036840701749035
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    References listed on IDEAS

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    1. Mr. Guillermo Calvo & Mr. Carlos A. Végh Gramont, 1992. "Currency Substitution in Developing Countries: An Introduction," IMF Working Papers 1992/040, International Monetary Fund.
    2. Kem Reat Viseth, 2001. "Currency Substitution and Financial Sector Developments in Cambodia," International and Development Economics Working Papers idec01-4, International and Development Economics.
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    Cited by:

    1. Samreth, Sovannroeun, 2008. "Estimating Money Demand Function in Cambodia: ARDL Approach," MPRA Paper 16274, University Library of Munich, Germany, revised Jun 2009.
    2. Mr. Marco Airaudo & Mr. Edward F Buffie & Luis-Felipe Zanna, 2016. "Inflation Targeting and Exchange Rate Management In Less Developed Countries," IMF Working Papers 2016/055, International Monetary Fund.
    3. Buffie, Edward F. & Airaudo, M. & Zanna, Felipe, 2018. "Inflation targeting and exchange rate management in less developed countries," Journal of International Money and Finance, Elsevier, vol. 81(C), pages 159-184.
    4. Hay, Chanthol, 2021. "Real dollarization in Phnom Penh, Evidence from two surveys," Japan and the World Economy, Elsevier, vol. 60(C).
    5. Samreth, Sovannroeun & Sok, Pagna, 2018. "Revisiting the Impacts of Exchange Rate Movement on the Dollarization Process in Cambodia," MPRA Paper 91240, University Library of Munich, Germany.
    6. Samreth, Sovannroeun, 2011. "An empirical study on the hysteresis of currency substitution in Cambodia," Journal of Asian Economics, Elsevier, vol. 22(6), pages 518-527.

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