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On The Welfare Benefits of an International Currency

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  • Mr. Prakash Kannan

Abstract

Is it beneficial for a country's currency to be used internationally? And, if so, can we quantify the benefit? Since the emergence of the euro, there has been great interest in the consequences of a transfer of the US dollar's premier international role to the euro. Building on recent advancements in the literature on search models of money, this paper presents a novel model-based approach towards assessing the welfare benefits associated with the international use of a country's currency. The welfare gain for the Euro area in having the euro internationally used ranges from 1.7% to 2.1% of consumption.

Suggested Citation

  • Mr. Prakash Kannan, 2007. "On The Welfare Benefits of an International Currency," IMF Working Papers 2007/049, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2007/049
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    References listed on IDEAS

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    Cited by:

    1. Kannan, Prakash, 2009. "On the welfare benefits of an international currency," European Economic Review, Elsevier, vol. 53(5), pages 588-606, July.
    2. Christian Thimann, 2010. "Global Roles of Currencies," Palgrave Macmillan Books, in: Wensheng Peng & Chang Shu (ed.), Currency Internationalization: Global Experiences and Implications for the Renminbi, chapter 1, pages 3-41, Palgrave Macmillan.

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