IMF Working Papers

International Currencies and Endogenous Enforcement: An Empirical Analysis

By Roohi Prem

March 1, 1997

Preview Citation

Format: Chicago

Roohi Prem. International Currencies and Endogenous Enforcement: An Empirical Analysis, (USA: International Monetary Fund, 1997) accessed December 22, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper investigates the determinants of the international role of a currency. It argues that standard determinants such as monetary performance and financial openness are at best imperfect indicators of a currency’s stability prospects, because the issuer’s promise of stability is not exogenously enforceable. The paper advocates an enforcement approach to international currencies that make explicit the underlying incentive incompatibilities. Additional enforcement determinants of currency internationalization are identified. The model is estimated using time-series cross-sectional analysis for three data sets. Monetary performance-related standard determinants fail to exhibit explanatory power, whereas the enforcement determinants are strongly significant and robust.

Subject: Balance of payments, Central bank autonomy, Central banks, Currencies, Exchange rates, Financial institutions, Foreign direct investment, Foreign exchange, International bonds, Money

Keywords: Asia and Pacific, Central bank autonomy, Currencies, Currency characteristic, Currency internationalization, Currency issuer, Currency nation, Currency share, Currency stability, Enforcement, Europe, Exchange rate, Exchange rates, Foreign direct investment, Global, International bonds, International currency, Normal, Share curve, Stability criteria, Stability prospect, Unit of account, Western Hemisphere, WP

Publication Details

  • Pages:

    57

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 1997/029

  • Stock No:

    WPIEA0291997

  • ISBN:

    9781451844764

  • ISSN:

    1018-5941

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