Portes, Richard. <br/><br/>
The Emergence of the Euro as an International Currency / 
Richard Portes, Helene Rey. 
 - Cambridge, Mass.  National Bureau of Economic Research  1998. 
 - 1 online resource:  illustrations (black and white); 
 - NBER working paper series  no. w6424 .
 - Working Paper Series (National Bureau of Economic Research)  no. w6424. .
<br/><br/> February 1998. 
<br/><br/> The European Union will enter Stage Three of Economic and Monetary Union (EMU) in 1999. The development of euro financial markets and thickness externalities in the use of the euro as a means of payment will be the major factors determining the importance of the euro as an international currency. As euro securities markets become deeper and more liquid and transactions costs fall, euro assets will become more attractive, and the use of the euro as a vehicle currency will expand; the two effects interact, as we demonstrate. We use a three-region world model as a framework for alternative steady-state scenarios. With forex and securities market data, we assess the plausibility of those scenarios and the implications for economic efficiency (welfare). We find that the euro may take on some of the current roles of the dollar. The welfare analysis reveals potential quantitatively significant benefits for the euro area, at the cost of the US and (to a lesser degree) Japan. 
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