Money Growth Uncertainty and Currency Substitution in IRAN: A Multivariate GARCH Approach

Subject Areas : Labor and Demographic Economics

Sima Eskandari Sabzi ¹ ( دانشجوی دکتری اقتصاد دانشگاه آزاد اسلامی واحد علوم و تحقیقات تهران )
Asad Allah Farzinvash ² ( عضو هیات علمی دانشگاه تهران )
Kambiz Hojabr Kiani ³ ( استاد اقتصاد دانشگاه آزاد اسلامی واحد علوم و تحقیقات تهران )
Hamid Shahrestani ⁴ ( دانشیار اقتصاد دانشگاه آزاد اسلامی واحد علوم و تحقیقات تهران )

Received: 2017-01-08 Accepted : 2017-01-08 Published : 2016-10-22

Keywords: Uncertainty, E52, JEL Classification: E41, F31. Keywords: Currency Demand, Currency Substitution, MVGARCH,

Abstract :

The aim of this paper is surveying the effects of money growth uncertainty on currency substitution. For this, bivariate GARCH model and VAR-BEKK method was used on the base of data for 1979 to 2014. The results show that money growth uncertainty affects currency substitution positively. Also, currency substitution, affected by its own past shock and the currency growth. On the other hand, there have been spillover of fluctuations from the currency growth to currency substitution and vice versa. Due to the existence of currency growth effective relationship on the currency substitution in Iran, it is necessary for controlling currency growth and preventing from currency irregular growth by policy makers.   

References:

-      زال­پور، غلامرضا (1373). جانشینی ارز به جای پول ملّی در اقتصاد ایران. پایان‌نامه کارشناسی ارشد علوم اقتصادی، دانشگاه تربیت مدرس.

-      فرزین­وش، اسداله، لشکری، محمد (1382). جانشینی پول و تقاضا برای پول: شواهدی از ایران، پژوهشنامه بازرگانی، (29): 1-51.

-      لشکری، محمد، فرزین­وش، اسداله (1382). تخمین حجم دلارهای در گردش و تخمین درجه جانشینی در ایران، تحقیقات اقتصادی، ویژه‌نامه: 77-57.

-      زمانیان، غلامرضا، ابوذری، ایوب (1392). شوک‌های ارزی و دلاری شدن اقتصاد ایران، فصلنامه مطالعات اقتصادی کاربردی در ایران، 2 (5): 76-57.

-      طهرانچیان، امیرمنصور، نوروزی بیرامی، معصومه (1390).  آزمون جانشینی پول در ایران، کاربردی از الگوی خودبازگشتی با وقفه‌های توزیعی، فصلنامه پژوهش‌های اقتصادی ایران، (16): 115-99.

-      یزدان­پناه، احمد، خیابانی، ناصر (1375). جایگزینی پول ملّی (دلاری شدن اقتصاد ایران)، مجموعه مقالات ششمین کنفرانس سیاست‌های پولی و ارزی؛ مؤسسه تحقیقات پولی و بانکی بانک مرکزی جمهوری اسلامی ایران: 335-359

-      ابوذری، ایوب، زمانیان، غلامرضا (1393). تقاضای پول در اقتصادهای دلاری شده (مطالعه موردی ایران)، تحقیقات اقتصادی، 2 (49): 228-211.

-        Adom, A.D., Sharma, S.C.,Morshed, A.M. (2009). Currency Substitution in selected African Countries, Journal of Economic Studies, 36(6): 616-640.

-        Agenor , P.C. & Khan, S. (1996). Foreign currency deposits and the demand for money in developing countries. Journal of Development Economics, 50:101-118.

-        Alami, T.(2001). Currency substitution versus dollarization a portfolio balance model, Journal of Policy Modeling, 23: 473-479.  

-        Alesina, A., & Barro, M. (2001). Dollarization. The American Economic Review 91 (2): 381–385.

-        Arango, S., &  Nadiri, M.I. (1981). Demand for money in open economies. Journal of Monetary Economics, 7:69-83.

-        Bahmani Oskooee, M., Tanku, A.  (2006). Black market exchange rate, currency substitution and the demand for money in LDCs, Economic System, 30:249-263.

-        Bahmani-Oskooee, M. and Malixi,M. (1991). Exchange Rate Sensitivity of Demand for Money in Developing Countries, Applied Economics, 23:1377-1384.

-        Berg, A., & Borensztein, E. (2000). The Pros and Cons of Full Dollarization". IMF Working Paper; Full dollarization (IMF).    

-        Bordo, M.D., &Choudri, E. (2000). Currency substitute and the demand for money: Some evidence for Canada,  Journal of Money Credit and Banking. 14; February: 48-57.

-        Calvo, G. A., & Rodriguez A.Z. (1977). A Model of exchange rate determination under currency substitution and rational expectations, Journal of Political Economy. 85:617-25.

-        Calvo, G.A. and Vegh, C.A. (1992). Currency substitution in developing countries:An Introduction, IMF; WP/ 92/ 40

-        De Nicoló, G., Honohan, P., Ize, A. (2003), Dollarization of the banking system: Good or bad? International Monetary Fund Working Paper No. 03/146.

-        Edwards, S. and Magendzo. A. (2001). Dollarization, Inflation and Growth, NBER Working Paper (8671).

-        El-Erian M.A. (1988). Currency Substitution in Egypt and Yemen Arab Republic, IMF Staff Papers; Vol.35;no.1 pp .85-103.

-        Feige E., Faelund M., Sonje V. and Sosic V. (2003). Unofficial Dollarization in Latin America, in The Dollarization Debat ed. by Salvatore Dominick, Dean James & Willett Thomas. New York: Oxford University Press.

-        Idrisov, G. Freikman, L. (2009). Modeling the Currency Structure of Bank Deposite: Does the Ratchet Effect Matter? Working Papers, Gaidar Institute for Economic Policy, Moscow, Russia.

-        Kamin, S.B and Ericsson.N.A. (2003). Dollarization in Post- Hyperinflationary Argentina, Journal of International Money and  Finance. 22:185-211.

-        Kumamoto, H.,(2014). Recent Experiences with Currency Substitution, international Journal of Financial Research , 5(4).

-        Levent, K. (2007). Does currency substitution affect exchange rate uncertainty? the case of Turkey, Published in: Journal of Qafqaz University , 20, (2007): 133-141.

-        Levy Yeyati, E. and Broda, C.,(2006). Endogenous deposit dollarization. Journal of Money, Credit and Banking. 38:4.

-        Levy Yeyati, E., & Sturzenegger, F. (2003b). Dollarization: A Primer, in Levy Yeyati, E & F. Sturzenegger (eds,) Dollarization. Cambridge, MA: The MIT Press: 1-52.

-        Levy Yeyati, E., & Sturzenegger. F. (2003a). Dollarization Cambridge, MA: The MIT Press.

-        Milenković, I., & Davidović, I. (2013). Determinants of Currency Substitution/Dollarization – The Case of the Republic of Serbia, Journal of Central Banking Theory and Practice, 2, issue 1: 139-155.

-        Mongardini, J., & Muller, J. (1999). Ratchet effects in currency substitution:An Application to the Kyrgyz Republic; IMF;WP/99/102; July; pp.1-23.

-        Neanidis, K. C., &  Savva, C. S.(2006). the effects of uncertainty on currency substitution and inflation: evidence from emerging economies, the school of economics discussion paper series 0609, Economics, The University of Manchester.

-        Quispe-Agnoli, M.  (2002). Costs and benefits of dollarization, Florida International University, USA.  Latin America & Caribbean Center, Summit of the Americas Center, 2002, [e-mail]

-        Ratti R., & B.W. Jeong  (1994). Variation in the real exchange rate as a source of currency substitution, Journal of International Money and Finance, 13: 537-550.

-        Rose, A. (2000). One money, one market: The effect of common currencies on trade, Economic Policy.

-        Sahay, R., & Vegh, C.A. (1995). Dollarization in transition economies: Evidence and policy implications. IMF Working Paper. WP/95/96: 1

-        Savastano, M. (1996). Dollarization in Latin America: Recent evidence and some policy issues. IMF Working Paper. No.4.