Toward a Theory of International Currency
The authors use the framework of random matching games and develop a two-country model of the world economy in which two national currencies compete and may be circulated as media of exchange. There are multiple equilibria, which differ in the areas of circulation of the two currencies. In one equilibrium, the two national currencies are circulated only locally. In another, one currency is circulated as an international currency. There is also an equilibrium in which both currencies are accepted internationally. The authors also find an equilibrium in which the two currencies are directly exchanged. Copyright 1993 by The Review of Economic Studies Limited.
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Volume (Year): 60 (1993)
Issue (Month): 2 (April)
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