title: An Investigation of the Macroeconomic and Monetary Effects of Dollarization in Eritrea

authors: Mengesha, Lula G.

subjects: Dollarization

abstract: Most countries of the developing world have voluntarily or involuntarily been involved in using foreign currencies and trapped their economies for either the best or worst outcomes of dollarization. For those countries that have fully dollarized their economies, dollarization has provided some benefits in terms of bringing economic stability. However, the benefits in these economies came with costs that have worsened the income inequality and poverty that exist within their economies. Similarly, some countries that rely partially on their own currencies and partially on foreign currencies have seen different outcomes of partial dollarization.
	This research has specifically examined the reliance of the Eritrean economy on hard currency. Despite numerous studies that have been conducted regarding the Eritrean economy, the dollarization of Eritrea is an important issue that has not been investigated. This research has uncovered what kind of dollarization the Eritrean economy has and also what factors drive the Eritrean dollarization. It has been found that there is partial dollarization with evidence of financial, sovereign liability and underground dollarization in the economy. Real dollarization is only manifested in the form of selling houses and lands in exchange for hard currency. It has also been discovered that banking practices, the structure of the interest rate, loans issued to the private sector relative to the government sector and the Eritrean monetary system, particularly the introduction of new currency, followed by the second war with Ethiopia in 1998, are some of the causative factors. 
	Furthermore, this research has investigated the impact of partial dollarization of the Eritrean economy on macro-economic variables with specific examination on the exchange rate volatility, inflation and the monetary policy transmission mechanisms. In each analysis, quarterly data starting from 1996 to 2008 is employed. The fundamental reason for selecting this time period for the study is the inability to obtain the data for some of the variables outside the specified time period. Exponential Generalised Autoregressive Conditionally Heteroscedasticity in mean (EGARCH) model is applied over real official exchange rate and on both nominal as well as real black market exchange rates. Dollarization measured by a hard currency index is then augmented in the variance equation of EGARCH-M (1, 1). The results show that partial dollarization of the Eritrean economy enhances the volatility of the real official exchange rate, the nominal and the real black market exchange rates.
To see whether partial dollarization reduces or produces inflation in the Eritrean economy, Vector Error Correction Models together with Dynamic Ordinary Least Squares (DOLS) are employed. The results indicate that inflation increases as a result of an increase in dollarization. This applies regardless of whether official or black market exchange rate data are used in the estimation. In terms of the short-run dynamics involved in the long-run relationship between dollarization and inflation, the speed of adjustment towards long-run equilibrium ranges from 7.2-7.6 percent per quarter. Both error correction terms are negative. This indicates that the adjustment process is stable and convergent towards the long-run equilibrium which implies that there is a guaranteed long-run relationship between inflation and the remaining variables including dollarization.
To examine the effectiveness of the channels of the monetary policy, Vector Autoregressive (VAR), Structural Autoregressive (SVAR) and Toda and Yamamoto (TY) models have been used. The results suggest that there is an effective exchange rate channel through the black market, an ineffective credit channel through the credit issued to the private sector and an effective credit channel through the credit issued to the government.  
In general, the contribution of this study can be summarized in three different areas: first, the measurement of dollarization; second, the determinants of dollarization; third, the effects of dollarization. Some of the policy implications of the findings are first, the Bank of Eritrea should address its exchange rate policy by revisiting the current official exchange rate and, at the same time, by addressing the growth of the black market foreign exchange. The Bank of Eritrea should also address its regulation on banking practices and the structure of interest rates. Second, the bank should create a conducive environment for the private sector to promote economic growth and minimise excessive government expenditure which requires fiscal discipline. Third, there should be an effort made to pave the ways for economic and financial cooperation with neighbouring countries.

text: An Investigation of the Macroeconomic and Monetary Effects of Dollarization in Eritrea Most countries of the developing world have voluntarily or involuntarily been involved in using foreign currencies and trapped their economies for either the best or worst outcomes of dollarization. For those countries that have fully dollarized their economies, dollarization has provided some benefits in terms of bringing economic stability. However, the benefits in these economies came with costs that have worsened the income inequality and poverty that exist within their economies. Similarly, some countries that rely partially on their own currencies and partially on foreign currencies have seen different outcomes of partial dollarization.
	This research has specifically examined the reliance of the Eritrean economy on hard currency. Despite numerous studies that have been conducted regarding the Eritrean economy, the dollarization of Eritrea is an important issue that has not been investigated. This research has uncovered what kind of dollarization the Eritrean economy has and also what factors drive the Eritrean dollarization. It has been found that there is partial dollarization with evidence of financial, sovereign liability and underground dollarization in the economy. Real dollarization is only manifested in the form of selling houses and lands in exchange for hard currency. It has also been discovered that banking practices, the structure of the interest rate, loans issued to the private sector relative to the government sector and the Eritrean monetary system, particularly the introduction of new currency, followed by the second war with Ethiopia in 1998, are some of the causative factors. 
	Furthermore, this research has investigated the impact of partial dollarization of the Eritrean economy on macro-economic variables with specific examination on the exchange rate volatility, inflation and the monetary policy transmission mechanisms. In each analysis, quarterly data starting from 1996 to 2008 is employed. The fundamental reason for selecting this time period for the study is the inability to obtain the data for some of the variables outside the specified time period. Exponential Generalised Autoregressive Conditionally Heteroscedasticity in mean (EGARCH) model is applied over real official exchange rate and on both nominal as well as real black market exchange rates. Dollarization measured by a hard currency index is then augmented in the variance equation of EGARCH-M (1, 1). The results show that partial dollarization of the Eritrean economy enhances the volatility of the real official exchange rate, the nominal and the real black market exchange rates.
To see whether partial dollarization reduces or produces inflation in the Eritrean economy, Vector Error Correction Models together with Dynamic Ordinary Least Squares (DOLS) are employed. The results indicate that inflation increases as a result of an increase in dollarization. This applies regardless of whether official or black market exchange rate data are used in the estimation. In terms of the short-run dynamics involved in the long-run relationship between dollarization and inflation, the speed of adjustment towards long-run equilibrium ranges from 7.2-7.6 percent per quarter. Both error correction terms are negative. This indicates that the adjustment process is stable and convergent towards the long-run equilibrium which implies that there is a guaranteed long-run relationship between inflation and the remaining variables including dollarization.
To examine the effectiveness of the channels of the monetary policy, Vector Autoregressive (VAR), Structural Autoregressive (SVAR) and Toda and Yamamoto (TY) models have been used. The results suggest that there is an effective exchange rate channel through the black market, an ineffective credit channel through the credit issued to the private sector and an effective credit channel through the credit issued to the government.  
In general, the contribution of this study can be summarized in three different areas: first, the measurement of dollarization; second, the determinants of dollarization; third, the effects of dollarization. Some of the policy implications of the findings are first, the Bank of Eritrea should address its exchange rate policy by revisiting the current official exchange rate and, at the same time, by addressing the growth of the black market foreign exchange. The Bank of Eritrea should also address its regulation on banking practices and the structure of interest rates. Second, the bank should create a conducive environment for the private sector to promote economic growth and minimise excessive government expenditure which requires fiscal discipline. Third, there should be an effort made to pave the ways for economic and financial cooperation with neighbouring countries.

year: 2013

title: Exclusivism and exclusivity: a contemporary theological challenge

authors: Pratt, Douglas

subjects: religion

abstract: The phenomenon of religious exclusivism increasingly confronts peoples of faith and goodwill who wish only for peaceful co-existence in equality and freedom with their religious neighbour. But there is more than one variety of religious exclusivism. This study will show that there are at least three variants of religious exclusivism, namely open, closed and extreme. Further, inasmuch as exclusivism indicates a positing of religious identity over against any “other”, then it will be argued that the variant exclusivisms themselves reflect a continuum of ideological and theological stance that is taken toward the concept of variety as represented by the religious “other” per se. This ranges through antithetical acknowledge-ment, enactive ignorance, and the intentional invalidation of variety. It is the issue of the invalidation of otherness which, I contend, constitutes the severe theological problem of religious exclusivism in extremis. It is here, in the modality of religious fundamentalism and extremism that theological ideology impinges most dramatically upon the public domain. Might it be possible to speak of a proper religious exclusivity without falling necessarily into the pit of exclusivist extremism? In addressing this question I shall briefly examine the views of Alvin Plantinga, Gavin D’Costa, and the declaration Nostra Aetate of Vatican II.

text: Exclusivism and exclusivity: a contemporary theological challenge The phenomenon of religious exclusivism increasingly confronts peoples of faith and goodwill who wish only for peaceful co-existence in equality and freedom with their religious neighbour. But there is more than one variety of religious exclusivism. This study will show that there are at least three variants of religious exclusivism, namely open, closed and extreme. Further, inasmuch as exclusivism indicates a positing of religious identity over against any “other”, then it will be argued that the variant exclusivisms themselves reflect a continuum of ideological and theological stance that is taken toward the concept of variety as represented by the religious “other” per se. This ranges through antithetical acknowledge-ment, enactive ignorance, and the intentional invalidation of variety. It is the issue of the invalidation of otherness which, I contend, constitutes the severe theological problem of religious exclusivism in extremis. It is here, in the modality of religious fundamentalism and extremism that theological ideology impinges most dramatically upon the public domain. Might it be possible to speak of a proper religious exclusivity without falling necessarily into the pit of exclusivist extremism? In addressing this question I shall briefly examine the views of Alvin Plantinga, Gavin D’Costa, and the declaration Nostra Aetate of Vatican II.

year: 2007-10

title: Youth Development Circles: A Report on a School Trial

authors: Hannah, Belinda Anne

subjects: Youth Development Circles

abstract: This research traces the development and trial of the Youth Development Circle (YDC) process in a low decile secondary school in a rural community in Aotearoa New Zealand. Youth Development Circles are an intervention based on restorative justice principles initially proposed by Braithwaite (2004). They were originally suggested as a strategy for use in an alternative education centre or “activity centre”.  Increasing use of restorative approaches has enabled many schools to make significant progress in reducing suspensions, but there remains a concern for students whose behaviour is at the more serious end of the spectrum - who are at risk of suspension, or exclusion, after multiple stand-downs from school.  The possibilities for the use of YDC were proposed to the school by the researcher, who is a Deputy Principal responsible for behaviour management and pastoral care.  This proposal was supported fully by the school’s staff and Board of Trustees.  The YDC process documented in this study was developed by the researcher, informed by a range of sources including Youth Development Circles, Judge McElrea’s proposed School Community Conference (1996), and Hui Whakatika, developed at the University of Waikato (2003).  Participation in the circles was a condition for the student to remain at the school. The school is a state school, with a roll of approximately 800. The ethnic breakdown of the students is 56% Māori and 39% NZ European with 5% of Pasifika, Asian and other.  

The YDC is a deliberate and careful process which aims to bring increased focus on the individual student and their educational outcomes, through engaging a community of care in supporting them. There were many anticipated benefits of the YDC for the student. Such benefits included an opportunity to establish and maintain healthy relationships of trust (within which negative experiences can be learned from), a re-establishment of trust, improved self-confidence and improved educational outcomes. The circles included members of the student’s whānau/family, a kaumātua/elder who cared about them, and representatives from local Police, Social Welfare, and the school.  The circles were studied over a period of one year.  Circles met regularly throughout this time, at increasing intervals.

A mixed method case study approach was used for this research which includes the collection of both quantitative and qualitative data. The study evaluated the effectiveness of the YDCs by analysing student behaviour, attendance and achievement KAMAR data, minutes of each circle meeting, and interviews with circle participants.


Three student case studies are presented.  The stories have had details altered and pseudonyms used to protect the persons involved. All the students completed the academic year without receiving a further stand down or suspension.  The data showed an improvement in student attendance, achievement and engagement in all three case studies.  Other outcomes include reflections on the process used, strategies for implementation in the school, and factors that either hindered or supported student, family or community involvement in YDCs. 

This exploratory study suggests that the Youth Development Circle could offer a unique possibility for inter-sectorial collaboration in the field of restorative justice.

text: Youth Development Circles: A Report on a School Trial This research traces the development and trial of the Youth Development Circle (YDC) process in a low decile secondary school in a rural community in Aotearoa New Zealand. Youth Development Circles are an intervention based on restorative justice principles initially proposed by Braithwaite (2004). They were originally suggested as a strategy for use in an alternative education centre or “activity centre”.  Increasing use of restorative approaches has enabled many schools to make significant progress in reducing suspensions, but there remains a concern for students whose behaviour is at the more serious end of the spectrum - who are at risk of suspension, or exclusion, after multiple stand-downs from school.  The possibilities for the use of YDC were proposed to the school by the researcher, who is a Deputy Principal responsible for behaviour management and pastoral care.  This proposal was supported fully by the school’s staff and Board of Trustees.  The YDC process documented in this study was developed by the researcher, informed by a range of sources including Youth Development Circles, Judge McElrea’s proposed School Community Conference (1996), and Hui Whakatika, developed at the University of Waikato (2003).  Participation in the circles was a condition for the student to remain at the school. The school is a state school, with a roll of approximately 800. The ethnic breakdown of the students is 56% Māori and 39% NZ European with 5% of Pasifika, Asian and other.  

The YDC is a deliberate and careful process which aims to bring increased focus on the individual student and their educational outcomes, through engaging a community of care in supporting them. There were many anticipated benefits of the YDC for the student. Such benefits included an opportunity to establish and maintain healthy relationships of trust (within which negative experiences can be learned from), a re-establishment of trust, improved self-confidence and improved educational outcomes. The circles included members of the student’s whānau/family, a kaumātua/elder who cared about them, and representatives from local Police, Social Welfare, and the school.  The circles were studied over a period of one year.  Circles met regularly throughout this time, at increasing intervals.

A mixed method case study approach was used for this research which includes the collection of both quantitative and qualitative data. The study evaluated the effectiveness of the YDCs by analysing student behaviour, attendance and achievement KAMAR data, minutes of each circle meeting, and interviews with circle participants.


Three student case studies are presented.  The stories have had details altered and pseudonyms used to protect the persons involved. All the students completed the academic year without receiving a further stand down or suspension.  The data showed an improvement in student attendance, achievement and engagement in all three case studies.  Other outcomes include reflections on the process used, strategies for implementation in the school, and factors that either hindered or supported student, family or community involvement in YDCs. 

This exploratory study suggests that the Youth Development Circle could offer a unique possibility for inter-sectorial collaboration in the field of restorative justice.

year: 2015