Are Euro Cash Holdings in Central and Eastern Europe Driven by Experience or Anticipation? Results from an OeNB Survey

Although euroization is an important phenomenon in emerging markets, still very little is known about who holds how much euro and for what purposes. In this paper, we employ unique survey data to analyze various aspects of foreign currency holdings in five Central and Eastern European countries (CEECs). This allows us to study the impact of expectations and hysteresis on individual behavior. Our results show that a substantial share of the population in the countries under review holds euro cash. We fi nd little evidence that infl ation or exchange rate expectations are important determinants of euroization, whereas variables related to a country’s economic history seem to be of some signifi cance. Our results also indicate that the demand for euro and its use in domestic payments increases as the date of euro adoption approaches.