IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

Global Roles of Currencies

  • Christian Thimann

This paper presents a new concept - the global roles of currencies. The concept combines the domestic and international (cross-border) use of currencies, and therefore captures the overall importance of different currencies in a globalized economy. The measure of a currency's global role is based on the size and stage of development of the underlying economy, as well as the size and stage of development of its financial markets and the scope of financial instruments available in this currency. The paper applies the concept to 22 currencies of advanced and emerging economies. The results confirm the well-known ranking for the leading currencies - in particular the US dollar and the euro - but give considerably greater weight to currencies of emerging economies than the results obtained from the international debt market, which has so far been used as the basis for measuring the international role of currencies in capital markets. The paper also discusses this established measure in detail, arguing that in view of financial globalization, an indicator based on currency shares in the international debt market alone represents a decreasing share of international financial market activity, as this market excludes government debt, other domestic debt and equities, which are increasingly of interest to international investors. The paper also presents an empirical application of the new global concept to examine cross-border portfolio holdings in debt and equity markets across advanced and emerging economies. It finds that the global role indicator is positively correlated with such holdings and, especially for emerging economies, fares better than the established international debt market indicator. The findings suggest a positive relationship between domestic financial development and international financial integration. Copyright 2008 The Author. Journal compilation 2008 Blackwell Publishing Ltd

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Wiley Blackwell in its journal International Finance.

Volume (Year): 11 (2008)
Issue (Month): 3 (December)
Pages: 211-245

in new window

Handle: RePEc:bla:intfin:v:11:y:2008:i:3:p:211-245
Contact details of provider: Web page:

Order Information: Web:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Fidora, Michael & Fratzscher, Marcel & Thimann, Christian, 2007. "Home bias in global bond and equity markets: The role of real exchange rate volatility," Journal of International Money and Finance, Elsevier, vol. 26(4), pages 631-655, June.
  2. Richard Portes & Hélène Rey, 2001. "The Determinants of Cross-Border Equity Flows," DELTA Working Papers 2001-08, DELTA (Ecole normale supérieure).
  3. Hartmann,Philipp, 1998. "Currency Competition and Foreign Exchange Markets," Cambridge Books, Cambridge University Press, number 9780521632737, October.
  4. McCauley, R.N., 1997. "The Euro and the Dollar," Princeton Essays in International Economics 205, International Economics Section, Departement of Economics Princeton University,.
  5. Detken, Carsten & Hartmann, Philipp, 2000. "The Euro and International Capital Markets," International Finance, Wiley Blackwell, vol. 3(1), pages 53-94, April.
  6. Menzie Chinn & Jeffrey Frankel, 2008. "Why the Euro Will Rival the Dollar," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 55(3), pages 255-278, September.
  7. Chinn, Menzie D. & Ito, Hiro, 2006. "What matters for financial development? Capital controls, institutions, and interactions," Journal of Development Economics, Elsevier, vol. 81(1), pages 163-192, October.
  8. Matteo Bobba & Andrew Powell & Giuseppe Della Corte, 2007. "On the Determinants of International Currency Choice: Will the Euro Dominate the World?," Research Department Publications 4530, Inter-American Development Bank, Research Department.
  9. Chinn, Menzie David & Frankel, Jeffrey A., 2006. "Will the Euro Eventually Surpass the Dollar As Leading International Reserve Currency?," Santa Cruz Department of Economics, Working Paper Series qt4hz4n9pb, Department of Economics, UC Santa Cruz.
  10. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer, . "What Works in Securities Laws?," Working Paper 19491, Harvard University OpenScholar.
  11. Prakash Kannan, 2007. "On The Welfare Benefits of an International Currency," IMF Working Papers 07/49, International Monetary Fund.
  12. Charles P. Thomas, 2006. "The Performance of International Equity Portfolios," The Institute for International Integration Studies Discussion Paper Series iiisdp162, IIIS.
  13. Stephanie E. Curcuru & Tomas Dvorak & Francis E. Warnock, 2007. "Cross-border returns differentials," Globalization and Monetary Policy Institute Working Paper 04, Federal Reserve Bank of Dallas.
  14. R. Gaston Gelos & Shang-Jin Wei, 2005. "Transparency and International Portfolio Holdings," Journal of Finance, American Finance Association, vol. 60(6), pages 2987-3020, December.
  15. Fang Cai & Francis E. Warnock, 2006. "International Diversification at Home and Abroad," NBER Working Papers 12220, National Bureau of Economic Research, Inc.
  16. Siegfried, Nikolaus & Simeonova, Emilia & Vespro, Cristina, 2007. "Choice of currency in bond issuance and the international role of currencies," Working Paper Series 0814, European Central Bank.
  17. Charles P. Thomas & Francis E. Warnock & Jon Wongswan, 2006. "The Performance of International Equity Portfolios," NBER Working Papers 12346, National Bureau of Economic Research, Inc.
  18. Stephanie E. Curcuru & Tomas Dvorak & Francis E. Warnock, 2008. "Cross-Border Returns Differentials," NBER Working Papers 13768, National Bureau of Economic Research, Inc.
  19. Benjamin H Cohen, 2005. "Currency choice in international bond issuance," BIS Quarterly Review, Bank for International Settlements, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bla:intfin:v:11:y:2008:i:3:p:211-245. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)

or (Christopher F. Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.