Currency Blocs in the 21st Century
Deutsche Bundesbank Discussion Paper No. 12/2011
80 Pages Posted: 8 Mar 2012
There are 3 versions of this paper
Currency Blocs in the 21st Century
Currency Blocs in the 21st Century
Currency Blocs in the 21st Century
Date Written: March 7, 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, Currency Bloc Equilibrium, Additive Random Utility Model
JEL Classification: F02, F31, F33, E42, C25
Suggested Citation: Suggested Citation