Dollarization Dilemma : Price Stability at the Cost of External Competitiveness in Cambodia

Cambodia has recorded both rapid economic growth and macroeconomic stability in recent decades despite (or thanks to) high levels of dollarization. Previous studies on dollarization in Cambodia have largely focused on examining its causes and estim...

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Main Authors:	Samreth, Sovannroeun, Sanchez-Martin, Miguel Eduardo, Ly, Sodeth
Format:	Working Paper
Language:	English
Published:	World Bank, Washington, DC 2019
Subjects:	MONETARY POLICY EXCHANGE RATE REGIME DOLLARIZATION EXPORT COMPETITIVENESS INTEREST RATE SHOCK
Online Access:	http://documents.worldbank.org/curated/en/249731560785850537/Dollarization-Dilemma-Price-Stability-at-the-Cost-of-External-Competitiveness-in-Cambodia http://hdl.handle.net/10986/31906

id	okr-10986-31906
recordtype	oai_dc
spelling	okr-10986-319062022-09-19T12:16:27Z Dollarization Dilemma : Price Stability at the Cost of External Competitiveness in Cambodia Samreth, Sovannroeun Sanchez-Martin, Miguel Eduardo Ly, Sodeth MONETARY POLICY EXCHANGE RATE REGIME DOLLARIZATION EXPORT COMPETITIVENESS INTEREST RATE SHOCK Cambodia has recorded both rapid economic growth and macroeconomic stability in recent decades despite (or thanks to) high levels of dollarization. Previous studies on dollarization in Cambodia have largely focused on examining its causes and estimating seigniorage losses. As an attempt to further explore the effects of dollarization in Cambodia, this paper examines its impact on the competitiveness of the export sector. The main results, based on a vector autoregression estimation of quarterly data over 1994Q4-2016Q4, indicate that a positive US interest rate shock has a negative impact on Cambodia's trade balance with the European Union, its main trading partner, as it leads to appreciation of the US dollar. Furthermore, this shock also leads to a significant decrease in Cambodia's international reserve levels during the first two quarters following the shock. The surrendering of monetary and exchange rate independence seems to affect the competitiveness of the tradable sector negatively as well as exacerbate financial sector vulnerability to solvency and liquidity risks. 2019-06-19T17:06:29Z 2019-06-19T17:06:29Z 2019-06 Working Paper http://documents.worldbank.org/curated/en/249731560785850537/Dollarization-Dilemma-Price-Stability-at-the-Cost-of-External-Competitiveness-in-Cambodia http://hdl.handle.net/10986/31906 English Policy Research Working Paper;No. 8893 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper East Asia and Pacific Cambodia
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	MONETARY POLICY EXCHANGE RATE REGIME DOLLARIZATION EXPORT COMPETITIVENESS INTEREST RATE SHOCK
spellingShingle	MONETARY POLICY EXCHANGE RATE REGIME DOLLARIZATION EXPORT COMPETITIVENESS INTEREST RATE SHOCK Samreth, Sovannroeun Sanchez-Martin, Miguel Eduardo Ly, Sodeth Dollarization Dilemma : Price Stability at the Cost of External Competitiveness in Cambodia
geographic_facet	East Asia and Pacific Cambodia
relation	Policy Research Working Paper;No. 8893
description	Cambodia has recorded both rapid economic growth and macroeconomic stability in recent decades despite (or thanks to) high levels of dollarization. Previous studies on dollarization in Cambodia have largely focused on examining its causes and estimating seigniorage losses. As an attempt to further explore the effects of dollarization in Cambodia, this paper examines its impact on the competitiveness of the export sector. The main results, based on a vector autoregression estimation of quarterly data over 1994Q4-2016Q4, indicate that a positive US interest rate shock has a negative impact on Cambodia's trade balance with the European Union, its main trading partner, as it leads to appreciation of the US dollar. Furthermore, this shock also leads to a significant decrease in Cambodia's international reserve levels during the first two quarters following the shock. The surrendering of monetary and exchange rate independence seems to affect the competitiveness of the tradable sector negatively as well as exacerbate financial sector vulnerability to solvency and liquidity risks.
format	Working Paper
author	Samreth, Sovannroeun Sanchez-Martin, Miguel Eduardo Ly, Sodeth
author_facet	Samreth, Sovannroeun Sanchez-Martin, Miguel Eduardo Ly, Sodeth
author_sort	Samreth, Sovannroeun
title	Dollarization Dilemma : Price Stability at the Cost of External Competitiveness in Cambodia
title_short	Dollarization Dilemma : Price Stability at the Cost of External Competitiveness in Cambodia
title_full	Dollarization Dilemma : Price Stability at the Cost of External Competitiveness in Cambodia
title_fullStr	Dollarization Dilemma : Price Stability at the Cost of External Competitiveness in Cambodia
title_full_unstemmed	Dollarization Dilemma : Price Stability at the Cost of External Competitiveness in Cambodia
title_sort	dollarization dilemma : price stability at the cost of external competitiveness in cambodia
publisher	World Bank, Washington, DC
publishDate	2019
url	http://documents.worldbank.org/curated/en/249731560785850537/Dollarization-Dilemma-Price-Stability-at-the-Cost-of-External-Competitiveness-in-Cambodia http://hdl.handle.net/10986/31906
_version_	1764475338313695232

Dollarization Dilemma : Price Stability at the Cost of External Competitiveness in Cambodia

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