Currency substitution, portfolio diversification and money demand

Detalhes bibliográficos
Autor(a) principal: Freitas, Miguel Lebre de
Data de Publicação: 2004
Tipo de documento: Artigo
Idioma: eng
Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
Texto Completo: http://hdl.handle.net/1822/1272
Resumo: We extend the Thomas (1985) dynamic optimissing model of money demand and currency substitution to the case in which the individual has no access to bonds denominated in foreign currency. We show that in this case the demand for domestic money is influenced by portfolio decisions. Contrary to what defended by the Portfolio Balance Approach to currency substitution, the results obtained in this paper suggest that the significance of an expected exchange rate depreciation term in the demand for domestic money provides a valid test for the present of curency substitution. The results also suggest that, in countries facing monetary instability and currency substitution, restricting the availability of interest-bearning assets denominated in foreign currency may have a destabilising impact on the money demand.
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spelling Currency substitution, portfolio diversification and money demandMoney demandCurrency substitutionDollarisationPortfolio choiceWe extend the Thomas (1985) dynamic optimissing model of money demand and currency substitution to the case in which the individual has no access to bonds denominated in foreign currency. We show that in this case the demand for domestic money is influenced by portfolio decisions. Contrary to what defended by the Portfolio Balance Approach to currency substitution, the results obtained in this paper suggest that the significance of an expected exchange rate depreciation term in the demand for domestic money provides a valid test for the present of curency substitution. The results also suggest that, in countries facing monetary instability and currency substitution, restricting the availability of interest-bearning assets denominated in foreign currency may have a destabilising impact on the money demand.Fundação para a Ciência e Tecnologia (FCT) - Programa Operacional Ciência, Tecnologia e Inovação (POCTI).Universidade do Minho. Núcleo de Investigação em Políticas Económicas (NIPE)Universidade do MinhoFreitas, Miguel Lebre de20042004-01-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/1822/1272enginfo:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-07-21T12:11:05Zoai:repositorium.sdum.uminho.pt:1822/1272Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T19:02:48.171386Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse
dc.title.none.fl_str_mv Currency substitution, portfolio diversification and money demand
title Currency substitution, portfolio diversification and money demand
spellingShingle Currency substitution, portfolio diversification and money demand
Freitas, Miguel Lebre de
Money demand
Currency substitution
Dollarisation
Portfolio choice
title_short Currency substitution, portfolio diversification and money demand
title_full Currency substitution, portfolio diversification and money demand
title_fullStr Currency substitution, portfolio diversification and money demand
title_full_unstemmed Currency substitution, portfolio diversification and money demand
title_sort Currency substitution, portfolio diversification and money demand
author Freitas, Miguel Lebre de
author_facet Freitas, Miguel Lebre de
author_role author
dc.contributor.none.fl_str_mv Universidade do Minho
dc.contributor.author.fl_str_mv Freitas, Miguel Lebre de
dc.subject.por.fl_str_mv Money demand
Currency substitution
Dollarisation
Portfolio choice
topic Money demand
Currency substitution
Dollarisation
Portfolio choice
description We extend the Thomas (1985) dynamic optimissing model of money demand and currency substitution to the case in which the individual has no access to bonds denominated in foreign currency. We show that in this case the demand for domestic money is influenced by portfolio decisions. Contrary to what defended by the Portfolio Balance Approach to currency substitution, the results obtained in this paper suggest that the significance of an expected exchange rate depreciation term in the demand for domestic money provides a valid test for the present of curency substitution. The results also suggest that, in countries facing monetary instability and currency substitution, restricting the availability of interest-bearning assets denominated in foreign currency may have a destabilising impact on the money demand.
publishDate 2004
dc.date.none.fl_str_mv 2004
2004-01-01T00:00:00Z
dc.type.status.fl_str_mv info:eu-repo/semantics/publishedVersion
dc.type.driver.fl_str_mv info:eu-repo/semantics/article
format article
status_str publishedVersion
dc.identifier.uri.fl_str_mv http://hdl.handle.net/1822/1272
url http://hdl.handle.net/1822/1272
dc.language.iso.fl_str_mv eng
language eng
dc.rights.driver.fl_str_mv info:eu-repo/semantics/openAccess
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.publisher.none.fl_str_mv Universidade do Minho. Núcleo de Investigação em Políticas Económicas (NIPE)
publisher.none.fl_str_mv Universidade do Minho. Núcleo de Investigação em Políticas Económicas (NIPE)
dc.source.none.fl_str_mv reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
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collection Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
repository.name.fl_str_mv Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
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