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Currency blocs in the 21st century

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  • Fischer, Christoph

Abstract

Based on a classification of countries and territories according to their regime and anchor currency choice, the study considers the two major currency blocs of the present world. A nested logit regression suggests that long-term structural economic variables determine a given country's currency bloc affiliation. The dollar bloc differs from the euro bloc in that there exists a group of countries that peg temporarily to the US dollar without having close economic affinities with the bloc. The estimated parameters are consistent with an additive random utility model interpretation. A currency bloc equilibrium in the spirit of Alesina and Barro (2002) is derived empirically. Keywords: anchor currency choice, nested logit, exchange rate regime classification, additive random utility model, currency bloc equilibrium JEL-Classification: F02, F31, F33, E42, C25

Suggested Citation

  • Fischer, Christoph, 2012. "Currency blocs in the 21st century," BOFIT Discussion Papers 24/2012, Bank of Finland, Institute for Economies in Transition.
  • Handle: RePEc:bof:bofitp:2012_024
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    Cited by:

    1. Fischer, Christoph, 2015. "Determining global currency bloc equilibria," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113197, Verein für Socialpolitik / German Economic Association.
    2. Fischer, Christoph, 2016. "Determining global currency bloc equilibria: An empirical strategy based on estimates of anchor currency choice," Journal of International Money and Finance, Elsevier, vol. 64(C), pages 214-238.

    More about this item

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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