Currency Substitution: Theory And Empirical Analysis

Currency Substitution (CS) means that the foreign currency, serving as a media of exchange and a store of value substitutes die domestic currency by domestic residents in some ways. Its appearance can't be isolated from the economic increase and the reform of economic system. With the integrating of economy worldwide, our country's finance sector will be more and more open and naturally CS will be an important factor affecting our macro-economy. Undoubtedly, through the theory and empiricist analysis about CS, it is important for our country and other developing countries to keep the steady growth and stability of economy and finance in a long runBased on the conception of CS, this thesis not only probes into the relations between CS and other economic variables but also discusses its affection on macro-economic policies. The chapter one analyses the conception of CS and builds up a micro fundamental theory model of CS. The chapter two discusses the relations between CS and other economic variables. The chapter three discusses the affection on macro-economic policies by CS. The chapter four analyses how to prevent the disadvantages of CS in one country's economy. The chapter five analyses the degree of CS in Chinese economy and puts forward some policies.