Currency substitution – the use of foreign money to finance transactions between domestic residents – is increasingly common in low income and transition economies. Traditionally, however, empirical models of the demand for money tend to concentrate exclusively on the other dimension of...

We estimate the demand for money in Vietnam during the 1990s within a framework which distinguishes between currency substitution and portfolio dimensions of dollarization. This leads to a representation for the demand function in which the long-run income elasticity of demand is no longer...

This paper presents a monetary exchange rate model with imperfect capital mobility, slow adjustment of goods prices in the short-term and currency substitution. As in Dornbusch’s model (1976), it is demonstrated that an exogenous monetary shock can lead to an initial overshooting of the...