Money Demand and Inflation in Dollarized Economies : The Case of Russia

Author/Editor:

Franziska L Ohnsorge ; Nienke Oomes

Publication Date:

July 1, 2005

Electronic Access:

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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:

Money demand in dollarized economies often appears to be highly unstable, making it difficult to forecast and control inflation. In this paper, we show that a stable money demand function for Russia can be found for "effective broad money," which includes an estimate of foreign cash holdings. Moreover, we find that an excess supply of effective broad money is inflationary, while other excess money measures are not, and that effective broad money growth has the strongest and most persistent effect on short-run inflation.

Series:

Working Paper No. 05/144

Subject:

Currency substitution Demand for money Dollarization Foreign exchange Inflation Money demand Russian Federation

English

Publication Date:

July 1, 2005

ISBN/ISSN:

9781451861631/1018-5941

Stock No:

WPIEA2005144

Format:

Paper

Pages:

30

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