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The ECU - An Imaginary or Embryonic Form of Money: What Can We Learn from History?

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  • Michael D. Bordo
  • Anna J. Schwartz

Abstract

We present historical examples of new forms of money that can be com- pared with the ECU. We first define the ECU in its official role before turning to developments in the private market for ECUs. We then examine historical antecedents of three attributes of ECUs: a unit of account; a basket of currencies; a basis for monetary integration. We discuss which features if any of ECUs are unique, and the contribution of the historical analysis to assessing the future of ECUs. We then ask whether governments or markets have been dominant in the emergence of new forms of money. Whatever emerges as money in an economy becomes the general means of payment. Prices of commodities, services, and bonds are expressed in units of the money. Buyers use the money to purchase goods or bonds and sellers receive the money is exchange for goods or bonds. We conclude that, at this stage in its history, the ECU at best is an embryonic form of money, closer to historical imaginary monies than to existing currencies that the world has known.

Suggested Citation

  • Michael D. Bordo & Anna J. Schwartz, 1987. "The ECU - An Imaginary or Embryonic Form of Money: What Can We Learn from History?," NBER Working Papers 2345, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:2345
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    1. Fraas, Arthur, 1974. "The Second Bank of the United States: An Instrument for an Interregional Monetary Union," The Journal of Economic History, Cambridge University Press, vol. 34(2), pages 447-467, June.
    2. Cowen, Tyler & Kroszner, Randall, 1987. "The Development of the New Monetary Economics," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 567-590, June.
    3. Bordo, Michael D., 1986. "Money, deflation and seigniorage in the fifteenth century: A review essay," Journal of Monetary Economics, Elsevier, vol. 18(3), pages 337-346, November.
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    1. Eduardo Loyo, 2001. "Imaginary money against sticky relative prices," Textos para discussão 448, Department of Economics PUC-Rio (Brazil).
    2. Robert J. Shiller, 2002. "Indexed Units of Account: Theory and Assessment of Historical Experience," Central Banking, Analysis, and Economic Policies Book Series, in: Fernando Lefort & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Serie (ed.),Indexation, Inflation and Monetary Policy, edition 1, volume 2, chapter 4, pages 105-134, Central Bank of Chile.
    3. Woosik Moon & Yeongseop Rhee & Deokryong Yoon, 2006. "Regional Currency Unit in Asia : Property and Perspective," Macroeconomics Working Papers 21972, East Asian Bureau of Economic Research.
    4. David Cobham, 1989. "Strategies for Monetary Integration Revisited," Journal of Common Market Studies, Wiley Blackwell, vol. 27(3), pages 203-218, March.
    5. Labrinidis, George, 2014. "International reserves in the era of quasi-world money," MPRA Paper 59963, University Library of Munich, Germany.
    6. Loyo, Eduardo, 2002. "Imaginary money against sticky relative prices," European Economic Review, Elsevier, vol. 46(6), pages 1073-1092, June.

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