Departmental Bulletin Paper Policy Implications

KHOU, Vouthy  ,  OKUDA, Hidenobu

10 ( 2 )  , pp.117 - 127 , 2017-01-31 , 一橋大学大学院経済学研究科
Maintaining the macroeconomic stability is indispensable to enhance confidence in KHR and increase KHR use. However, since dollarization is likely to stay unless addressed, policy measures motivating economic entities to expand the use of KHR are to be in practice. Our survey's results suggest the following policy measures; (1) Market based measures: For making the public awarded about foreign exchange risk accompanied with using foreign currency, the exchange rate could be allowed to float. For reducing the inconvenience of using KHR, the issuance of larger denominated banknotes should be considered. For financial institutions to better manage KHR liquidity, market infrastructure such as interbank market, money market, and foreign exchange market should be develop. New hedging instruments and foreign exchange market infrastructure should be developed to make financial institutions easier to operate in KHR when their sources of funds are in foreign currencies. (2) Other instructional measures: Since Cambodian dollarization has been intimately related to the dollar-based financial development that has strong network externality, there is a need to continuously develop market infrastructure in favor of the KHR instruments. The government should gradually encourage firms and sellers to quote the price and payments of goods and services in KHR, and promote the payments of salary/wage in KHR. For facilitating the use of KHR through payment instruments, the government should encourage companies and financial institutions to open more bank accounts in KHR. For increasing the demand for riel and raise the riel supply in the economy, the government revenue collection and payments both on consumption and investment should be in KHR.

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