The loss of interest for the euro in Romania
Claudiu Albulescu (CRIEF), Dominique P\'epin (CRIEF)
TL;DR
This paper explains Romania's declining interest in the euro by modeling how a decrease in euro liquidity relative to the Romanian leu impacts demand, highlighting macroeconomic factors influencing currency preference.
Contribution
It extends a micro-founded money demand model to analyze currency interest shifts, emphasizing the role of relative liquidity in Romania.
Findings
Euro liquidity decline reduces interest in euro
Romanian leu becomes more attractive due to liquidity changes
Model explains recent currency preference trends in Romania
Abstract
We generalize a money demand micro-founded model to explain Romanians' recent loss of interest for the euro. We show that the reason behind this loss of interest is a severe decline in the relative degree of the euro liquidity against that of the Romanian leu.
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Taxonomy
TopicsMonetary Policy and Economic Impact · Economic theories and models · Economic Theory and Policy