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Reserve currencies: Can multiplicity work?

  • Satyendra Kumar Gupta


    (Indira Gandhi Institute of Development Research)

  • Ashima Goyal


    (Indira Gandhi Institute of Development Research)

The paper analyzes the potential rise of new reserve currencies in the context of the economic and political determinants of an international currency. Two models analyze the role of soft political power, switching costs to a new currency and transaction costs in the rise of a new currency. Quantitative indices are developed to measure these factors, which are then empirically tested and found to be statistically significant in determining the rise of international currency. The study further explores the greater use of Renminbi in East Asia and the trade integration in this region.

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Paper provided by Indira Gandhi Institute of Development Research, Mumbai, India in its series Indira Gandhi Institute of Development Research, Mumbai Working Papers with number 2014-010.

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Length: 40 pages
Date of creation: Mar 2014
Date of revision:
Handle: RePEc:ind:igiwpp:2014-010
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  1. Rey, Helene, 2001. "International Trade and Currency Exchange," Review of Economic Studies, Wiley Blackwell, vol. 68(2), pages 443-64, April.
  2. Menzie Chinn & Jeffrey Frankel, 2008. "Why the Euro Will Rival the Dollar," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 55(3), pages 255-278, September.
  3. Benjamin Cohen, 2012. "The Benefits and Costs of an International Currency: Getting the Calculus Right," Open Economies Review, Springer, vol. 23(1), pages 13-31, February.
  4. Jones, Robert A, 1976. "The Origin and Development of Media of Exchange," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 757-75, August.
  5. Black, Stanley W., 1991. "Transactions costs and vehicle currencies," Journal of International Money and Finance, Elsevier, vol. 10(4), pages 512-526, December.
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