Vehicle Currencies And the Structure Of International Exchange / Paul R. Krugman.

By:

Krugman, Paul R

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w0333.Publication details: Cambridge, Mass. National Bureau of Economic Research 1979.Description: 1 online resource: illustrations (black and white)Online resources:

Available additional physical forms:

Hardcopy version available to institutional subscribers

Abstract: This paper is concerned with the reasons why some currencies, such as the pound sterling and the U.S. dollar, have come to serve as "vehicles" for exchanges of other currencies. It develops a three-country model of payments equilibrium with transaction costs, and shows how one currency can emerge as an international medium of exchange. Transaction costs are then made endogenous, and it is shown how the underlying structure of payments limits, without necessarily completely determining, the choice and role of a vehicle currency. Finally, a dynamic model is developed, and the way in which one currency can displace another as the international medium of exchange is explored.

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Holdings
Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w0333 (Browse shelf(Opens below))	Not For Loan

Total holds: 0

April 1979.

This paper is concerned with the reasons why some currencies, such as the pound sterling and the U.S. dollar, have come to serve as "vehicles" for exchanges of other currencies. It develops a three-country model of payments equilibrium with transaction costs, and shows how one currency can emerge as an international medium of exchange. Transaction costs are then made endogenous, and it is shown how the underlying structure of payments limits, without necessarily completely determining, the choice and role of a vehicle currency. Finally, a dynamic model is developed, and the way in which one currency can displace another as the international medium of exchange is explored.