Currency blocs in the 21st century

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Title: Currency blocs in the 21st century
Author: Fischer, Christoph
Organization: Bank of Finland
Department / Unit: Institute for Economies in Transition (BOFIT)
Series: BOFIT Discussion Papers
Series number: 24/2012
Year of publication: 2012
Publication date: 15.10.2012
Pages: 57 s.
Keywords: valuuttakurssit; valuutat; euro; kansainvälinen; Bofit-kokoelma; USD; käyttö; valuutta-alueet
JEL: F02; F31; F33; E42; C25
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

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