This study evaluates substitution of foreign currency balances in Estonia, a transition economy neighbouring countries participating in EMU. The focus is on substitution between dollar and euro balances in the three basic functions of money – unit of account, store of value and means of...

This paper presents new evidence on the dynamics of dollarization and euroization for twenty-five transition countries. Estimates of the amount of foreign currency in circulation (FCC) in transition countries are used to develop a new comprehensive dollarization index (CDI) and separate indices...

This paper examines currency derivatives that have emerged in international financial markets over the past two years, emphasizing the departures of spot exchange rate movements from the macroeconomic fundamentals among the “triad” currencies: the U.S. Dollar (USD), the German Mark (DM), and...

Using one of the key property of copulas that they remain invariant under an arbitrary monotonous change of variable, we investigate the null hypothesis that the dependence between financial assets can be modeled by the Gaussian copula. We find that most pairs of currencies and pairs of major...

This paper investigates possible contribution of third-currency effects to exchange rate movements. It reopens the subject of currency substitution and examines whether the third-currency effects change when the third-currency is a complement as opposed to when it is a substitute for currencies...

This paper investigates effects of third-currency monetary policy shocks on exchange rates. For this purpose we setup a structural VAR model containing the exchange rates of the three major currencies – the U.S. dollar, the euro and the Japanese yen – and short-term interest rates on the...

We investigate the theory and empirics of currency substitution and currency complementarity. Analytical tractability is facilitated by focussing on a small currency. Data spanning 1985 to the turn of the century contain evidence of the Australian dollar’s substitution for the mark and...

This paper assesses the relevance of national information in estimating the demand for euro-area M3 from three perspectives. First, we check whether national money demands can legitimately be aggregated. Second, we compare time-series and panel methods to estimate aggregate long-run...

This paper tests the relative version of purchasing power parity (PPP) for a set of ten Asian developing countries using panel cointegration framework. We employ 'between-dimension' dynamic OLS estimator as proposed by Pedroni (2001b). The test results overwhelmingly reject the PPP hypothesis.

This paper tests the relative version of purchasing power parity (PPP) for a set of ten Asian developing countries using panel cointegration framework. We employ 'between-dimension' dynamic OLS estimator as proposed by Pedroni (2001b). The test results overwhelmingly reject the PPP hypothesis.