Currency substitution

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Currency substitution occurs when the currency of a country is replaced as payment in national traffic entirely or partially by a foreign currency.

This can be an official policy action, e.g. B. with the dollarization in Ecuador or with the use of the euro as a means of payment in parts of the former Yugoslavia (with the exception of Slovenia, which is a regular member of the euro zone ).

Furthermore, currency substitution also occurs in the case of the informal and possibly illegal use of a foreign currency on a large scale by private individuals, e.g. B. in the widespread use of the D-Mark in the former socialist states. This generally expresses a lack of confidence in the stability of the national currency as a means of payment and store of value, e.g. B. in a period of high inflation . The problem here is that informal currency substitution leads to a further decline in the value of the national currency and thus further accelerates inflation.

See also: dollarization