Volkan, Engin2016-01-082016-01-081998http://hdl.handle.net/11693/18434Ankara : Department of Economics and the Institute of Economics and Social Sciences of Bilkent University, 1998.Thesis(Master's) -- Bilkent University, 1998.Includes bibliographical references leaves 24-26.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.ix, 67 leavesEnglishinfo:eu-repo/semantics/openAccessCurrency substitutionBellman’s equationValue function iterationCash-in-advanceTransaction costsHG3823 .V65 1998Currency substitution--Mathematical models.Thesis