This paper builds an inter-temporal model to study the value and network effects in the process of currency substitution. According to our model, we can define the inaction area and malignant area by taking real interest rate difference and network effect variable as two axes. We also find that the network effect is inconsistent, that is, in the inaction area it will stabilize the using of domestic currency and inhibit currency substitution, however, in the malignant area, it will accelerate currency substitution. This inconsistence result to a ratchet effect in the process of anti-currency substitution.
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
11627.
Length: Date of creation: Dec 2005 Date of revision:
May 2007 Publication status: Published in 21shiji shuliang jingjixue 1.8(2008): pp. 127-134 Handle: RePEc:pra:mprapa:11627
Find related papers by JEL classification: F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
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