International Currencies and Endogenous Enforcement: An Empirical Analysis
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.
Series:
Working Paper No. 1997/029
Subject:
Balance of payments Central bank autonomy Central banks Currencies Exchange rates Financial institutions Foreign direct investment Foreign exchange International bonds Money
English
Publication Date:
March 1, 1997
ISBN/ISSN:
9781451844764/1018-5941
Stock No:
WPIEA0291997
Pages:
57
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