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Transactions Use of the Ecu in the Transition to EMU: A Model of Network Externalities

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  • Polly REYNOLDS ALLEN

    (University of Connecticut)

Abstract

To answer the question under what conditions during the transition to EMU will firms choose the Ecu as their currency for transactions, the paper develops a simple model of a firm's choice of currency for pricing, invoicing and receiving payments for its product-its transactions currency. The focus of the model is the presence of network externalities derived from use of the same currency by others. The model points up the fallacy of focusing only on relative inflation performances of currencies when judging their likely adoption for transactions purposes.

Suggested Citation

  • Polly REYNOLDS ALLEN, 1993. "Transactions Use of the Ecu in the Transition to EMU: A Model of Network Externalities," Discussion Papers (REL - Recherches Economiques de Louvain) 1993017, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvre:1993017
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    File URL: http://www.jstor.org/stable/40724016
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    Cited by:

    1. Lefebvre, Dominique, 1997. "Euro Internationalization," MPRA Paper 89353, University Library of Munich, Germany.
    2. Agnès Bénassy & Alexander Italianer & Jean Pisani-Ferry, 1993. "Les implications extérieures de la monnaie unique," Économie et Statistique, Programme National Persée, vol. 262(1), pages 49-62.
    3. Gilbert Koenig, 1994. "Les actifs libellés en écus dans le système monétaire et financier européen : une approche en termes de portefeuille," Revue Économique, Programme National Persée, vol. 45(4), pages 1045-1064.
    4. Françoise Le Quéré, 1999. "Les sources de l'internationalisation de l'euro," Revue d'Économie Financière, Programme National Persée, vol. 52(2), pages 31-54.

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