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Which currency is best for business in a small country?

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  • Dilger, Alexander

Abstract

The optimal currency for a country is an important topic. While it is difficult to identify the best option overall, for all stakeholders and including political considerations, it is easier to answer the more limited question of the title: Which currency is best for business in a small country? Several kinds of currencies are discussed and three criteria that business companies are interested in are applied. Although there are opposing considerations, the best compromise for business in a small country seems to be a currency board with a fixed exchange rate that can be adapted in case of a crisis. A currency board is also the best protection against speculative attacks. The anchor currency should be that of the largest trading partner, especially if the trade with it is much larger than with all other ones.

Suggested Citation

  • Dilger, Alexander, 2015. "Which currency is best for business in a small country?," Discussion Papers of the Institute for Organisational Economics 5/2015, University of Münster, Institute for Organisational Economics.
  • Handle: RePEc:zbw:umiodp:52015
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    References listed on IDEAS

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    1. Rolnick, Arthur J & Weber, Warren E, 1986. "Gresham's Law or Gresham's Fallacy?," Journal of Political Economy, University of Chicago Press, vol. 94(1), pages 185-199, February.
    2. Fornaro, Luca, 2015. "Financial crises and exchange rate policy," Journal of International Economics, Elsevier, vol. 95(2), pages 202-215.
    3. repec:mes:challe:v:39:y:1996:i:5:p:11-17 is not listed on IDEAS
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    Cited by:

    1. Dilger, Alexander, 2015. "Welche Unternehmen profitieren vom Euro?," Discussion Papers of the Institute for Organisational Economics 8/2015, University of Münster, Institute for Organisational Economics.
    2. Dilger, Alexander, 2017. "The Euro from a business perspective," Discussion Papers of the Institute for Organisational Economics 3/2017, University of Münster, Institute for Organisational Economics.

    More about this item

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions
    • G01 - Financial Economics - - General - - - Financial Crises
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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