Dollarization in North Korea: Evidence from a Survey of North Korean Refugees

• Published in: East Asian economic review Vol. 21; no. 1; pp. 81 - 100
• Main Authors: Mun, Sung Min, Jung, Seung Ho
• Format: Journal Article
• Language: English
• Published: Sejong Korea Institute for International Economic Policy (KIEP) 01.03.2017; Korea Institute for International Economic Policy; 대외경제정책연구원
• Subjects: American dollar; Asset Substitution; Confiscatory Currency Reform; Currency; Currency Substitution; Defections; Dollar standard; Dollarization; Economic activity; Economic models; Fixed exchange rates; Foreign exchange rates; Households; Informal economy; International trade; North Korea; Price stabilization; Refugees; Renminbi; Studies; Transition economies; Trends; 경제학; South Korea; China; North Korea
• ISSN: 2508-1640; 2234-8867; 2508-1667; 2287-8793
• DOI: 10.11644/KIEP.EAER.2017.21.1.324

This study measures the degree of dollarization in North Korea using results from a survey of 231 North Korean refugees. Specifically, we compare foreign currency use of households as both store-of-value substitutes (i.e., asset substitution) and transaction substitutes (i.e., currency substitution) before and after the confiscatory currency reform of 2009. The degree of dollarization has advanced since the currency reform in terms of both asset and currency substitutions. Survey results also indicate that the Chinese yuan is frequently used in the Sino-North Korean border area, whereas the US dollar is predominantly used in non-border areas. Furthermore, foreign currency increasingly serves as a medium of exchange not only for large transactions but also for smaller transactions, such as food purchases.