Overshooting and Dollarization in the Democratic Republic of the Congo

The paper develops an interpretation of volatile exchange rate movements in a dollarized economy with very high rates of inflation. Differences between the rate of inflation and currency depreciation (over- or undershooting of the exchange rate) are seen as a proxy for changes in the relative demand for domestic and foreign currency. A simple model is calibrated for the Democratic Republic of the Congo in the 1990s and is used to derive estimates of the rate of dollarization.
Publication date: May 2003
ISBN: 9781451852844
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Inflation , Inflation , Overshooting , Congo , Democratic Republic of , Zaïre , inflation , foreign currency , money demand , monetary policy , central bank , Central Banking , and the Supply of Money and Credit: General , Zaire

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