Currency Blocs in the 21st Century

57 Pages Posted: 16 Oct 2012

Multiple version iconThere are 3 versions of this paper

Date Written: October 12, 2012

Abstract

Based on a classification of countries and territories according to their regime and anchor currency choice, the study considers the two major currency blocs of the present world. A nested logit regression suggests that long-term structural economic variables determine a given country’s currency bloc affiliation. The dollar bloc differs from the euro bloc in that there exists a group of countries that peg temporarily to the US dollar without having close economic affinities with the bloc. The estimated parameters are consistent with an additive random utility model interpretation. A currency bloc equilibrium in the spirit of Alesina and Barro (2002) is derived empirically.

Keywords: anchor currency choice, nested logit, exchange rate regime classification, additive random utility model, currency bloc equilibrium

JEL Classification: F02, F31, F33, E42, C25

Suggested Citation

Fischer, Christoph A., Currency Blocs in the 21st Century (October 12, 2012). BOFIT Discussion Paper No. 24/2012, Available at SSRN: https://ssrn.com/abstract=2161915 or http://dx.doi.org/10.2139/ssrn.2161915

Christoph A. Fischer (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

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