ABSTRACT

The Kalman filter was employed on one observed equation and two state space equations to predict the proportional coefficients which were used to estimate the amount of US Dollar circulation outside banks in Cambodia. The degree of dollarization was high as measure by DR4 indicator bounded in the range between 86 percent and 91 percent from 2010 to 2017. But as compare to GDP, the amount of US Dollar in circulation was rather low aim to the increase in foreign currency deposits. The result of survey from 530 respondents indicated that most of the people’s income earned in US Dollar and which turned into the purchase of goods and services in the markets were mainly conducted in US Dollar. Not many people known about the present of the South East Asia Central Bank (SEACEN), but surprising result had revealed that 72.64 percent of the respondents chose ASEAN currency, while 27.36 percent chose US Dollar.

 Keywords: Kalman filter, Dollarization, DR4, SEACEN and ASEAN Currency