Currency substitution: a numerical dynamic programming approach
Date
1998
Authors
Editor(s)
Advisor
Başçı, Erdem
Supervisor
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Co-Supervisor
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Abstract
This thesis conducts a theoretical study on currency substitution in an infinitelylived small open financially repressed economy which is subject to stochastic inflation shocks. For this purpose, a dynamic programming model is constructed under the assumption that purchasing power parity holds. The solution of the model through value function iteration shows that under high inflation, and financial repression, the inhibitants of an economy will demand foreign currency to the extend that it provides a better protection of their wealth against inflation.
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Course
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Book Title
Degree Discipline
Economics
Degree Level
Master's
Degree Name
MA (Master of Arts)
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Language
English