 Legal restrictions and international currencies: An experimental approachShuze Ding and Daniela Puzzello Journal of International Economics, 2020, vol. 126, issue C Abstract: This paper integrates theory and experiments to explore how policy rules related to government interventions can affect economic allocations and the international status of a currency. Using a two-country, two-currency search model, we study two types of government interventions: (1) legal restrictions impacting a seller's ability to accept a foreign currency, and (2) reductions to the cost a seller must pay to accept a foreign currency. The first intervention can be viewed as a way to capture a decrease in capital controls, while the second can be viewed as a way to explore the impact of reducing information costs associated with using a foreign currency. Our results indicate that abolishing legal restrictions that impact a seller's ability to accept a foreign currency can increase both quantities traded and the number of trades involving two types of currencies. Additionally, the international status of currencies is significantly enhanced when sellers face very low foreign currency acceptance costs. Keywords: Search models of money; International economics; Monetary experiment (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:126:y:2020:i:c:s0022199620300581 DOI: 10.1016/j.jinteco.2020.103342 Access Statistics for this article Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and RodrÃguez-Clare, Andrés More articles in Journal of International Economics from Elsevier |
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