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Network effects, homogeneous goods and international currency choice: new evidence on oil markets from an older era

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  • Mehl, Arnaud
  • Eichengreen, Barry
  • Chiţu, Livia

Abstract

Conventional wisdom has it that network effects are strong in markets for homogeneous goods, leading to the dominance of one settlement currency in such markets. The alleged dominance of the dollar in global oil markets is said to epitomize this phenomenon. We question this presumption with evidence for earlier periods showing that several national currencies have simultaneously played substantial roles in global oil markets. European oil import payments before and after World War II were split between the dollar and non-dollar currencies, mainly sterling. Differences in use of the dollar across countries were associated with trade linkages with the United States and the size of the importing country. That several national currencies could simultaneously play a role in international oil settlements suggests that a shift from the current dollar-based system toward a multi-polar system in the period ahead is not impossible. JEL Classification: F30, N20

Suggested Citation

  • Mehl, Arnaud & Eichengreen, Barry & Chiţu, Livia, 2014. "Network effects, homogeneous goods and international currency choice: new evidence on oil markets from an older era," Working Paper Series 1651, European Central Bank.
  • Handle: RePEc:ecb:ecbwps:20141651
    Note: 501438
    as

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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Agnès Bénassy-Quéré, 2015. "The euro as an international currency," Working Papers halshs-01144371, HAL.
    2. Eichengreen, Barry & Flandreau, Marc & Mehl, Arnaud & Chitu, Livia, 2017. "International Currencies Past, Present, and Future: Two Views from Economic History," OUP Catalogue, Oxford University Press, number 9780190659455.

    More about this item

    Keywords

    homogeneous goods; international invoicing currency; network effects; oil markets; US dollar role;

    JEL classification:

    • F30 - International Economics - - International Finance - - - General

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