This paper undertakes an exploratory analysis of the inflationary dynamics within the Croatian economy over the period January 1992 December 1999. Recognizing the structural break in the inflationary process corresponding to the anti-inflationary stabilization program of October 1993, the analysis proceeds by estimating an augmented vector autoregressive (VAR) model of the log first-differences...

We quantify the effects of lending and balance sheet channels on corporate investment during large crises in emerging markets. The depreciated currency creates investment opportunities in the tradable sector but firms might be financially constrained due to: 1) a deterioration of their balance sheet via un-hedged foreign currency debt (balance sheet channel) and 2) a decline in the supply of cr...

Many papers in the recent literature in open economy macroeconomics make different assumptions about the currency in which firms set their export prices when nominal prices must be pre-set. But to date, all of these studies take the currency of price setting as exogenous. This paper sets up a simple two-country general equilibrium model in which exporting firms can choose the currency in which ...

Liberalization of foreign exchange regime and instability of national currency are among the major factors that shaped the level and strength of currency substitution in Ukraine. In this paper, a problem of currency substitution is addressed from the point of view of households. It is argued that the most conventional measure of currency substitution, namely the ratio of foreigncurrency denomin...

One of the most significant factors influencing the liquidity of the financial market is the amount of currency in circulation. Although the central bank is responsible for the distribution of the currency it cannot assess the demand for the currency, as that demand is influenced by the non-banking sector. Therefore, the amount of currency in circulation has to be forecasted. This paper introdu...

abstract financial crises and currency instabilities within developing and emerging economies during the last decade had a tremendous impact on the economic performance and increased vulnerability of economies against domestic and foreign shocks. the timing of capital liberalization is one of the significant debates among other issues related to currency instability, and it would be more conven...

With considering a ‘triangle of three major currency pairs’, there is a tiny difference between multiplication of exchange rate for the first two currency pairs and the third. To discover whether this little difference can lead to a neutral arbitrage or not, I took portfolios of 35 baskets of three major currency pairs(combinations of all 7 major currencies). There are eight approaches (differe...

The present paper examines the ability to evaluate prices in a familiar currency (French francs, Portugese escudos, or Irish punt) and in an unfamiliar currency (euro). Participants evaluated prices for different items either by selecting the most appropriate price from a set of alternatives (in a timed or not-timed version) or by directly producing a price estimate for each item. The results f...

Why do countries participate in currency unions or unilaterally adopt a foreign currency? I investigate the roles of geography, synchronization of economic shocks, cultural similarity, size, political integration and colonial heritage as determinants of monetary unions. The results motivate a selection model for common currency areas, which I then use to revisit the impact of currency-union mem...