Money Demand and Inflation in Dollarized Economies: The Case of Russia

31 Pages Posted: 3 Mar 2006

See all articles by Nienke Oomes

Nienke Oomes

International Monetary Fund (IMF)

Franziska Ohnsorge

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: July 2005

Abstract

Money demand in dollarized economies often appears to be highly unstable, making it difficult to forecast and control inflation. In this paper, we show that a stable money demand function for Russia can be found for "effective broad money," which includes an estimate of foreign cash holdings. Moreover, we find that an excess supply of effective broad money is inflationary, while other excess money measures are not, and that effective broad money growth has the strongest and most persistent effect on short-run inflation.

Keywords: money demand, inflation, dollarization, currency substitution, Russia

JEL Classification: E31, E41, F31

Suggested Citation

Oomes, Nienke and Ohnsorge, Franziska, Money Demand and Inflation in Dollarized Economies: The Case of Russia (July 2005). IMF Working Paper, Vol. , pp. 1-31, 2005. Available at SSRN: https://ssrn.com/abstract=888013

Nienke Oomes (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Franziska Ohnsorge

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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