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“Co-circulation” involves the regular use of two or more currencies within an economy. This paper examines methodologies to measure the extent to which foreign currencies are circulated within an economy. Ample anecdotal evidence exists that the U.S. dollar, DM, and other currencies are widely used outside their home countries, as general mediums of exchange, as speculative instruments, or as means of saving. Co-circulation is rarely estimated, which can result in serious errors in statistical estimates of international capital flows and monetary aggregates. We examine a variety of measurement techniques that might be used in various situations. However, estimation remains difficult or impossible in some settings. Limited evidence available suggests that co-circulation is widespread and large scale in some countries. In the final section, we discuss some policy implications of co-circulation regarding seigniorage, inflation control, and the partial integration of monetary systems that accompanies co-circulation. An appendix by Roman Zytek discusses possible sampling biases in measuring co-circulation due to segmentation in markets.

Banks and Banking --- Foreign Exchange --- Money and Monetary Policy --- Survey Methods --- Methodology for Collecting, Estimating, and Organizing Macroeconomic Data --- Data Access --- Money Supply --- Credit --- Money Multipliers --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Demand for Money --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Monetary economics --- Currency --- Foreign exchange --- Banking --- Currencies --- Demand for money --- Exchange rate adjustments --- Bank deposits --- Exchange rate arrangements --- Money --- Financial services --- Banks and banking --- United States

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Money. Monetary policy --- Argent (monnaie) --- Banken en bankwezen --- Banks and banking --- Banques et opérations bancaires --- Geld --- Money --- Money theory --- Muntpolitiek --- Politique monétaire --- Monetary policy --- Money supply --- Money market --- 330.05 --- 332.46 --- Money markets --- Finance --- Financial institutions --- Money stock --- Quantity of money --- Supply of money --- Demand for money --- Monetary management --- Economic policy --- Currency boards

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This paper contains an empirical analysis of currency substitution in Turkey: a simple relationship between the share of foreign currency holdings in M2X on one side and movements in the exchange rate or inflation on the other is derived from a two-stage portfolio choice model. This relationship is estimated by band spectrum regression which allows to remove from the data the short-term cyclical components. The results show that the relationship between currency substitution depends mainly on long-term movements in the exchange rate, while the effect of inflation on currency substitution is not statistically significant.

Foreign Exchange --- Inflation --- Money and Monetary Policy --- Single Equation Models --- Single Variables: General --- Single Variables: Other --- Money and Interest Rates: General --- Demand for Money --- Open Economy Macroeconomics --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Price Level --- Deflation --- Monetary Policy --- Monetary economics --- Currency --- Foreign exchange --- Macroeconomics --- Dollarization --- Currencies --- Exchange rates --- Nominal anchors --- Monetary policy --- Money --- Prices --- Turkey

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Bankers --- Banks and banking, Central --- Government executives --- International finance --- Money supply --- 332.11 --- Central banking --- banques --- bourse --- commerce mondial --- economie --- inflation --- marches financiers --- monnaie --- politique monetaire --- #ECO:01.01:economie algemeen --- #ECO:02.02:financiële sector bank --- Fc3.i --- 08 --- 333.111.0 --- 333.613 --- 333.80 --- AA / International- internationaal --- 336.71 --- 339.7 --- Executives --- Public officers --- Bank officers --- Capitalists and financiers --- International monetary system --- International money --- Finance --- International economic relations --- Money stock --- Quantity of money --- Supply of money --- Money --- Demand for money --- Monetary policy --- Banker's banks --- Banks, Central --- Central banks --- Banks and banking --- 336.71 Bankwezen --- Bankwezen --- 339.7 Internationale financien. Buitenlands betalingsverkeer --(z.o {336}) --- Internationale financien. Buitenlands betalingsverkeer --(z.o {336}) --- banken --- beurs --- wereldhandel --- inflatie --- financiele markten --- geld --- monetair beleid --- Biografieën en memoires --- Algemeenheden. Theoretische en beschrijvende studies. Centrale banken --- Activiteiten van de nationale en internationale markten. Beursnoteringen van aandelen en obligaties --- Geld-, bank- en kredietpolitiek. Kapitaalmarkt en -rente: algemeenheden --- Money. Monetary policy

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Authors of Working Papers are normally staff members of the Fund or consultants, although on occasion outside authors may collaborate with a staff member in writing a paper. The views expressed in the Working Papers or their summaries are, however, those of the authors and should not necessarily be interpreted as representing the views of the Fund. Copies of individual Working Papers and information on subscriptions to the annual series of Working Papers may be obtained from IMF Publication Services, International Monetary Fund, 700 19th Street, Washington, D.C. 20431. Telephone: (202) 623-7430 Telefax: (202) 623-7201 This compilation of summaries of Working Papers released during July-December 1994 is being issued as a part of the Working Paper series. It is designed to provide the reader with an overview of the research work performed by the staff during the period.

Exports and Imports --- Foreign Exchange --- Labor --- Macroeconomics --- Public Finance --- Fiscal Policy --- International Investment --- Long-term Capital Movements --- International Monetary Arrangements and Institutions --- Criteria for Decision-Making under Risk and Uncertainty --- International Lending and Debt Problems --- International Financial Markets --- Macroeconomics: Production --- Business Fluctuations --- Cycles --- Studies of Particular Policy Episodes --- Comparative Studies of Particular Economies --- Monetary Policy --- Current Account Adjustment --- Short-term Capital Movements --- National Budget --- Budget Systems --- State and Local Borrowing --- Firm Behavior --- Externalities --- Asymmetric and Private Information --- Employment --- Unemployment --- Wages --- Intergenerational Income Distribution --- Aggregate Human Capital --- Aggregate Labor Productivity --- Time Allocation and Labor Supply --- Labor Demand --- Wage Level and Structure --- Wage Differentials --- Labor Turnover --- Vacancies --- Layoffs --- Renewable Resources and Conservation: Government Policy --- Trade Policy --- International Trade Organizations --- Social Security and Public Pensions --- Economics of the Elderly --- Economics of the Handicapped --- Non-labor Market Discrimination --- Open Economy Macroeconomics --- Price Level --- Inflation --- Deflation --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- Prices, Business Fluctuations, and Cycles: Forecasting and Simulation --- Models of Trade with Imperfect Competition and Scale Economies --- Empirical Studies of Trade --- Demand and Supply of Labor: General --- Unemployment Insurance --- Severance Pay --- Plant Closings --- Estimation --- Education: Government Policy --- Labor Force and Employment, Size, and Structure --- Wages, Compensation, and Labor Costs: General --- Mobility, Unemployment, and Vacancies: General --- Information and Market Efficiency --- Event Studies --- Efficiency --- Optimal Taxation --- Renewable Resources and Conservation: General --- Fiscal Policies and Behavior of Economic Agents: General --- Publicly Provided Goods: General --- National Government Expenditures and Health --- Trade: General --- Trade: Forecasting and Simulation --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Financial Markets and the Macroeconomy --- Central Banks and Their Policies --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Financial Institutions and Services: Government Policy and Regulation --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Money Supply --- Credit --- Money Multipliers --- Macroeconomics: Consumption --- Saving --- Wealth --- Financial Aspects of Economic Integration --- National Deficit Surplus --- Investment --- Capital --- Intangible Capital --- Capacity --- National Government Expenditures and Education --- Welfare, Well-Being, and Poverty: General --- Socialist Systems and Transitional Economies: Planning, Coordination, and Reform --- Taxation and Subsidies: Incidence --- Taxation and Subsidies: Externalities --- Redistributive Effects --- Environmental Taxes and Subsidies --- Demand for Money --- Comparative or Joint Analysis of Fiscal and Monetary Policy --- Stabilization --- Treasury Policy --- Economic Methodology --- International Economics: General --- Multinational Firms --- International Business --- Auctions --- Structure and Scope of Government: Other --- Policy Objectives --- Policy Designs and Consistency --- Policy Coordination --- Nonrenewable Resources and Conservation: Government Policy --- Model Construction and Estimation --- Neoclassical Models of Trade --- International Finance: Other --- Methodology for Collecting, Estimating, and Organizing Macroeconomic Data --- Data Access --- Demographic Trends, Macroeconomic Effects, and Forecasts --- Econometric and Statistical Methods: Special Topics: Other --- Interest Rates: Determination, Term Structure, and Effects --- Other Substantive Areas of Law: Other --- State Space Models --- Socialist Systems and Transitional Economies: General --- Socialist Systems and Transitional Economies: Prices --- Socialist Systems and Transitional Economies: National Income, Product, and Expenditure --- Money --- Socialist Systems and Transitional Economies: Performance and Prospects --- Taxation, Subsidies, and Revenue: General --- General Financial Markets: Government Policy and Regulation --- General Financial Markets: General (includes Measurement and Data) --- Human Capital --- Skills --- Occupational Choice --- Labor Productivity --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Labour --- income economics --- Currency --- Foreign exchange --- Finance --- International economics --- Real exchange rates --- Human capital --- Asset prices --- Labor markets --- Prices --- Stock markets --- Financial markets --- Labor market --- Saving and investment --- United States