Determining global currency bloc equilibria: An empirical strategy based on estimates of anchor currency choice
Journal of International Money and Finance, 2016, vol. 64, issue C, 214-238
The study presents an empirical strategy for determining global currency bloc equilibria. The procedure includes, first, a nested logit estimation of the combined determinants of currency regime and anchor currency choice; second, a test for a welfare-maximizing regime decision, in which estimates of the relative welfare of alternative regimes are inferred from the results of the first step estimation; and third, taking the path dependency of regime choice into account, a currency bloc equilibrium is derived. In equilibrium, the dollar bloc is somewhat smaller and the euro bloc larger than at present. Counterfactual exercises assess among others the potential for a renminbi bloc.
Keywords: Currency bloc equilibrium; Anchor currency choice; Nested logit; Additive random utility model (search for similar items in EconPapers)
JEL-codes: F02 F31 F33 E42 C25 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:64:y:2016:i:c:p:214-238
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