In search of a unit of stable global purchasing power
Lok Ho ()
International Review of Economics & Finance, 2018, vol. 56, issue C, 99-108
This paper introduces an improved version of the "World Currency Unit" (Ho, 2000), a synthetic unit of account representing constant real purchasing power. If commodity prices and bonds are quoted in this unit while allowing settlement in any currency, real prices and real interest rates will become more transparent. We show that the real prices of commodities are sensitive to movements in the nominal exchange value of the US dollar, and that they are Granger-caused by movements in the US dollar's nominal effective exchange rate. The proposed unit has implications for efficiency and the stability of the international monetary order.
Keywords: Synthetic unit of account; Inflation indexing; Real price discovery; Efficiency; International monetary architecture (search for similar items in EconPapers)
JEL-codes: F30 F31 F33 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:56:y:2018:i:c:p:99-108
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