The modern international monetary system has a number of flaws and therefore
needs cardinal change. Hence, economists from all over the world are
suggesting alternative international currencies that would make the
international monetary system more efficient. However, it is essential when
approaching the creation of a new international currency to analyze and take
into account the experience of all the past international currencies.
Therefore this paper begins with an exploration of the drawbacks of each of
the past and present international currencies. Drawing on this analysis a
justification will be made for the necessity of introducing a new
international currency, pointing to the requirements it should meet. Further
on, this paper proposes an alternative theoretically possible variant of the
international currency, with a fixed value relative to a commodity basket.
An abstract example is used to demonstrate its composition and circulation
mechanism.
This chapter focuses on the function of international currencies as foreign exchange vehicles, which has a character of the network externality. On January 1999, the euro was introduced in Europe where the functions of the euro are limed as a currency. After January 2002, the euro had perfect functions, while the competition between the euro and the U.S. dollar was keen as the dominant international currency. We present the currency competition model with a decreasing transaction cost that reflects the character of the network externality, to investigate the competition between the euro and the dollar. We suggest the impact of introduction of the euro is the determinant for competition winner between the euro and the dollar.
This chapter focuses on the function of international currencies as foreign exchange vehicles, which has a character of the network externality. On January 1999, the euro was introduced in Europe where the functions of the euro are limed as a currency. After January 2002, the euro had perfect functions, while the competition between the euro and the U.S. dollar was keen as the dominant international currency. We present the currency competition model with a decreasing transaction cost that reflects the character of the network externality, to investigate the competition between the euro and the dollar. We suggest the impact of introduction of the euro is the determinant for competition winner between the euro and the dollar.
International currencies play important roles as foreign exchange reserves but are also most frequently used to denominate corporate and government bonds, bank loans, and import and export invoices. These currencies offer unrivaled liquidity, constituting large shares of the volume on global foreign exchange markets, and are commonly chosen as the anchors targeted by countries with pegged or managed exchange rate regimes. We provide evidence suggesting a recent rise in the use of the dollar, and fall of the use of the euro, with similar patterns manifesting across all these aspects of international currency use.
Effect of Interest, Moving Average, and Historical Volatility in Forecasting Exchange Prices of Major International Currencies