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The Empirics of International Currencies: Historical Evidence

  • Flandreau, Marc
  • Jobst, Clemens

Using a new database for the late 19th century, when the pound sterling circulated all over the world, this paper provides the first review of critical empirical issues in the economics of international currencies. First, we report evidence in favor of the search-theoretic approach to international currencies. Second, we give empirical support to strategic externalities. Third, we provide strong confirmation of the existence of persistence. Finally, we reject the view that the international monetary system is subject to pure path dependency in that it cannot remain locked into some past equilibrium. Our conclusion is that, for the late 19th century at least, money and trade were complements.

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File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=5529
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5529.

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Date of creation: Mar 2006
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Handle: RePEc:cpr:ceprdp:5529
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  1. Zhou, Ruilin, 1997. "Currency Exchange in a Random Search Model," Review of Economic Studies, Wiley Blackwell, vol. 64(2), pages 289-310, April.
  2. Ravikumar, B & Wallace, Neil, 2002. "A benefit of uniform currency," MPRA Paper 22951, University Library of Munich, Germany.
  3. Michael D. Bordo, 1995. "The Gold Standard as a `Good Housekeeping Seal of Approval'," NBER Working Papers 5340, National Bureau of Economic Research, Inc.
  4. Engineer, Merwan, 2000. "Currency transactions costs and competing fiat currencies," Journal of International Economics, Elsevier, vol. 52(1), pages 113-136, October.
  5. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-54, August.
  6. Alberto Trejos & Randall Wright, 1996. "Search-theoretic models of international currency," Proceedings, Federal Reserve Bank of St. Louis, issue May, pages 117-132.
  7. H Rey, 1997. "International Trade and Currency Exchange," CEP Discussion Papers dp0322, Centre for Economic Performance, LSE.
  8. Lyons, Richard K. & Moore, Michael J., 2009. "An information approach to international currencies," Journal of International Economics, Elsevier, vol. 79(2), pages 211-221, November.
  9. North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 49(04), pages 803-832, December.
  10. Menzie Chinn & Jeffrey A. Frankel, 2007. "Will the Euro Eventually Surpass the Dollar as Leading International Reserve Currency?," NBER Chapters, in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 283-338 National Bureau of Economic Research, Inc.
  11. Linda S. Goldberg & Cedric Tille, 2005. "Vehicle currency use in international trade," Staff Reports 200, Federal Reserve Bank of New York.
  12. Allen Head & Shouyong Shi, 2002. "A Fundamental Theory of Exchange Rates and Direct Currency Trades," Working Papers shouyong-03-01, University of Toronto, Department of Economics.
  13. Pierre-Olivier Gourinchas & Hélène Rey, 2005. "From World Banker to World Venture Capitalist: US External Adjustment and the Exorbitant Privilege," NBER Working Papers 11563, National Bureau of Economic Research, Inc.
  14. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-37, May.
  15. Jeffrey A. Frankel & Giampaolo Galli & Alberto Giovannini, 1996. "The Microstructure of Foreign Exchange Markets," NBER Books, National Bureau of Economic Research, Inc, number fran96-1, December.
  16. Paul R. Krugman, 1984. "The International Role of the Dollar: Theory and Prospect," NBER Chapters, in: Exchange Rate Theory and Practice, pages 261-278 National Bureau of Economic Research, Inc.
  17. Flood, Robert P & Garber, Peter M, 1984. "Gold Monetization and Gold Discipline," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 90-107, February.
  18. Kiyotaki, Nobuhiro & Wright, Randall, 1993. "A Search-Theoretic Approach to Monetary Economics," American Economic Review, American Economic Association, vol. 83(1), pages 63-77, March.
  19. Craig, B. & Waller, C.J., 1999. "Currency Portfolios and Nominal Exchange Rates in a Dual Currency Search Economy," Papers 9916, London School of Economics - Centre for Labour Economics.
  20. Michael P. Dooley & J. Saul Lizondo & Donald J. Mathieson, 1989. "The Currency Composition of Foreign Exchange Reserves," IMF Staff Papers, Palgrave Macmillan, vol. 36(2), pages 385-434, June.
  21. Wright, Randall, 1995. "Search, evolution, and money," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 181-206.
  22. Krugman, Paul, 1980. "Vehicle Currencies and the Structure of International Exchange," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 12(3), pages 513-26, August.
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  24. Benjamin H Cohen, 2005. "Currency choice in international bond issuance," BIS Quarterly Review, Bank for International Settlements, June.
  25. Barry Eichengreen, 2005. "Sterling's Past, Dollar's Future: Historical Perspectives on Reserve Currency Competition," NBER Working Papers 11336, National Bureau of Economic Research, Inc.
  26. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
  27. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 101-121.
  28. Calvo, Guillermo & Vegh, Carlos, 1992. "Currency Substitution in Developing Countries: An Introduction," MPRA Paper 20338, University Library of Munich, Germany.
  29. Barry Eichengreen and Jeffrey A. Frankel., 1996. "On the SDR: Reserve Currencies and the Future of the International Monetary System," Center for International and Development Economics Research (CIDER) Working Papers C96-068, University of California at Berkeley.
  30. Liebowitz, S J & Margolis, Stephen E, 1990. "The Fable of the Keys," Journal of Law and Economics, University of Chicago Press, vol. 33(1), pages 1-25, April.
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