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In search of a unit of stable global purchasing power

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  • Ho, Lok Sang

Abstract

This paper introduces an improved version of the "World Currency Unit" (Ho, 2000), a synthetic unit of account representing constant real purchasing power. If commodity prices and bonds are quoted in this unit while allowing settlement in any currency, real prices and real interest rates will become more transparent. We show that the real prices of commodities are sensitive to movements in the nominal exchange value of the US dollar, and that they are Granger-caused by movements in the US dollar's nominal effective exchange rate. The proposed unit has implications for efficiency and the stability of the international monetary order.

Suggested Citation

  • Ho, Lok Sang, 2018. "In search of a unit of stable global purchasing power," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 99-108.
    • Handle: RePEc:eee:reveco:v:56:y:2018:i:c:p:99-108
    DOI: 10.1016/j.iref.2018.03.021
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    References listed on IDEAS

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    8. Scott H. Irwin & Dwight R. Sanders, 2010. "The Impact of Index and Swap Funds on Commodity Futures Markets: Preliminary Results," OECD Food, Agriculture and Fisheries Papers 27, OECD Publishing.
    9. Ho, Lok Sang, 2012. "Globalization, exports, and effective exchange rate indices," Journal of International Money and Finance, Elsevier, vol. 31(5), pages 996-1007.
    10. Lok Sang Ho, 2000. "Towards a New International Monetary Order: The World Currency Unit and the Global Indexed Bond," The World Economy, Wiley Blackwell, vol. 23(7), pages 939-950, July.
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    More about this item

    Keywords

    Synthetic unit of account; Inflation indexing; Real price discovery; Efficiency; International monetary architecture;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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