Currency substitution and financial crisis: lesson from a southeast emerging market
by Wahyu Ario Pratomo; Ari Warokka
J. for Global Business Advancement (JGBA), Vol. 9, No. 1, 2016

Abstract: This study aims to examine the currency substitution phenomenon in a country when it has a high inflation. In the modern economic era, Indonesia has experienced two elevated inflation periods between 1997 and 2012, i.e., when the Asian financial crisis stormed Southeast Asian countries in 1997, and the global one that affected most countries in 2008. By using a currency substitution model and four variables of vector auto-regressive (VAR), this study tested the currency substitution and its potential interactions during the crisis period in Indonesia. The results reveal that the currency substitution phenomenon exists significantly in Indonesia.

Online publication date: Mon, 22-Feb-2016

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