List of Articles Currency Substitution

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  1 - Money Growth Uncertainty and Currency Substitution in IRAN: A Multivariate GARCH Approach
  Sima Eskandari Sabzi Asad Allah Farzinvash Kambiz Hojabr Kiani Hamid Shahrestani
  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 substi More

  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.    Manuscript profile
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  2 - The relationship between exchange rate overshooting and currency substitution in Iran’s economy
  Seyed Mansour  Heshmati Sanzighi Rahman Saadat Esmaeil Abounoori
  When a country's domestic currency fails to fulfill its roles, foreign currency often replaces it, a phenomenon known as currency substitution. This is particularly common in developing countries and influenced by both economic and political factors. One significant eco More

  When a country's domestic currency fails to fulfill its roles, foreign currency often replaces it, a phenomenon known as currency substitution. This is particularly common in developing countries and influenced by both economic and political factors. One significant economic aspect affecting currency substitution is exchange rate overshooting. The main objective of this study is to investigate the relationship between exchange rate overshooting and currency substitution in Iran. Utilizing the Kamin-Ericsson (2003) method, we first examine the foreign currency in circulation and the volume of currency substitution in Iran’s economy using annual data from 1961 to 2021. Then, the Bayesian Vector Autoregression (BVAR) method employed to analyze the impact of exchange rate overshooting on currency substitution. The results indicate that exchange rate overshooting and inflation consistently lead to increased currency substitution in Iran’s economy. Conversely, economic growth negatively affects currency substitution. Additionally, neutralizing the effects of shocks related to exchange rate overshooting, economic development, and inflation requires more than five years. Therefore, economic policymakers must consider these factors when managing currency substitution. Manuscript profile