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The Empirics of International Currencies: Network Externalities, History and Persistence

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Author Info

  • Marc Flandreau
  • Clemens Jobst

Abstract

Using a new database for the late nineteenth century, when the pound sterling was the world's leading international currency, this article provides evidence on the empirical determinants of international currency status. We report evidence in favour of the search-theoretic models to international currencies. Using a microeconomic model of currency choice, we provide empirical support to strategic externalities. We find strong confirmation of the existence of persistence, but reject the view that the international monetary system was subject to pure path dependency and lock-in effects, suggesting that, even in the absence of WWI, the USD was bound to overtake sterling. Copyright � The Author(s). Journal compilation � Royal Economic Society 2009.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 119 (2009)
Issue (Month): 537 (04)
Pages: 643-664

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Handle: RePEc:ecj:econjl:v:119:y:2009:i:537:p:643-664

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Cited by:
  1. Marc Flandreau, Kim Oosterlinck, 2011. "Was the Emergence of the International Gold Standard Expected? Melodramatic Evidence from Indian Government Securities," IHEID Working Papers 01-2011, Economics Section, The Graduate Institute of International Studies.
  2. Ignazio Angeloni & André Sapir, 2011. "The international monetary system is changing: what opportunities and risks for the euro?," Working Papers 632, Bruegel.
  3. Eichengreen, Barry & Mehl, Arnaud & Chiţu, Livia, 2012. "When did the dollar overtake sterling as the leading international currency? Evidence from the bond markets," Working Paper Series 1433, European Central Bank.
  4. Akerman, Anders & Larsson, Anna, 2010. "The Global Arms Trade Network 1950-2007," Research Papers in Economics 2010:2, Stockholm University, Department of Economics.
  5. Marc Flandreau & Christophe Galimard & Clemens Jobst & Pilar Nogués-Marco, 2009. "Monetary geography before the Industrial Revolution," Cambridge Journal of Regions, Economy and Society, Cambridge Political Economy Society, vol. 2(2), pages 149-171.
  6. Barry Eichengreen, Marc Flandreau, 2010. "The Federal Reserve, the Bank of England, and the Rise of the Dollar as an International Currency, 1914-1939," IHEID Working Papers 16-2010, Economics Section, The Graduate Institute of International Studies.
  7. Joshua Aizenman, 2010. "International Reserves and Swap Lines in Times of Financial Distress : Overview and Interpretations," Finance Working Papers 23008, East Asian Bureau of Economic Research.
  8. Reiss, Daniel G, 2012. "Easing trade costs within Mercosul," MPRA Paper 42174, University Library of Munich, Germany.
  9. Hyoung-kyu Chey, 2013. "The Concepts, Consequences, and Determinants of Currency Internationalization," GRIPS Discussion Papers 13-03, National Graduate Institute for Policy Studies.
  10. Benjamin Cohen, 2012. "The Benefits and Costs of an International Currency: Getting the Calculus Right," Open Economies Review, Springer, vol. 23(1), pages 13-31, February.
  11. Zhang, Cathy, 2013. "An Information-Based Theory of International Currency," MPRA Paper 42114, University Library of Munich, Germany.
  12. Airaudo, Marco, 2012. "Endogenous Dollarization, Sovereign Risk Premia and the Taylor Principle," School of Economics Working Paper Series 2012-11, LeBow College of Business, Drexel University.

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