Dollarization in Cambodia : Causes and Policy Implications

Over the past decade, Cambodia has become Asia's most dollarized economy. In contrast, dollarization in neighboring Lao P.D.R., Mongolia, and Vietnam has been either declining or broadly stable. Somewhat paradoxically, growing dollarization in Cambodia has occurred against the backdrop of greater macroeconomic and political stability. The usual motive, currency substitution, does not appear to have been a factor. As the volume of dollars increased over the years, so has the volume of riel. A strong inward flow of dollars related to garments sector exports, tourism receipts, foreign direct investment, and aid, has benefitted the dollar based urban economy. The riel based rural economy has, however, lagged behind. Given international experience in de-dollarization, a carefully managed market based strategy, supported by a continued stable macroeconomic environment is essential for Cambodia's de-dollarization.
Publication date: March 2011
ISBN: 9781455218936
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Economics- Macroeconomics , Economics / General , International - Economics , foreign currency , monetary policy , inflation , macroeconomic stability , export sector , value of money , low inflation , capital flight , foreign exchange , open economy macroeconomics , expectations of inflation , printing money , loss of confidence , balance sheets , money stoc

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