Developing the ECU Markets: Perspectives on Financial Innovation

Richard M. Levich

No 2276, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The European Currency Unit (ECU) was officially introduced in March 1979 and has joined the ranks of innovative financial products that are rapidly appearing. The purpose of the paper is to explore the properties of the ECU and analyze those characteristics of the ECU, and products denominated in ECU, that offer value-added. Changes in communications and information technology, changes in the regulatory climate, and changes in the macroeconomic environment have generally encouraged recent financial innovations. We argue that the ECU has gained an edge on its component currencies because of its portfolio properties, its role in reducing transaction costs, the role of the European Monetary System, and trading factors peculiar to the ECU. Private participants should continue to gravitate toward the ECU as a useful vehicle to fulfill the services of money.

Date: 1987-06
Note: ME ITI IFM
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Published as Levich, Richard M. "Development of the ECU Markets: Perspectives on Financial Innovation," From The ECU Market: Current Developments and Future Prospects of the European Currency Unit, edited by Richard M. Levich and Andrea Sommariva, pp. 103-116. Lexington, MA: D.C. Heath and Co, 1987.
Published as Levich, Richard M. "Recent International Financial Innovations: Implications For Financial Management," Journal of International Financial Management and Accounting, 1989, v1(1,Spring), 1-14.

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