JICA Research Institute

Research

Empirical Study on the Promotion of Home Currency in Cambodia

Despite Cambodian government has never officially adopted dollarization, it has become one of the most dollarized economy around the world. Dollarization never abated its pace, and the ratio of foreign currency deposits to broad money (M2) account for around 83% at the end of 2012. For the Cambodian government or the central bank (the National Bank of Cambodia: NBC), such the unexpected dollarization poses many challenges to the management of monetary policies. Under heavy use of foreign exchanges, the central bank has limited control over the effective level of money supply. In addition, dollarization undermines the development of financial market including stock market, interbank market as well. Underdevelopment of interbank market and little demand for governmental bond quoted in Cambodian riel also impair the scope of macroeconomic policies of the Government and NBC. This research project will conduct local survey on financial institutions, enterprises and households in order to reveal the cause of the dollarization and elicit effective policy to promote home currency, as well as provide insights on the researches on dollarization of other Southeast Asian countries.

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