BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 24/2012:
Currency blocs in the 21st century
Christoph Fischer ()
Abstract: Based on a classification of countries and territories
according to their regime and anchor currency choice, the study considers
the two major currency blocs of the present world. A nested logit
regression suggests that long-term structural economic variables determine
a given country’s currency bloc affiliation. The dollar bloc differs from
the euro bloc in that there exists a group of countries that peg
temporarily to the US dollar without having close economic affinities with
the bloc. The estimated parameters are consistent with an additive random
utility model interpretation. A currency bloc equilibrium in the spirit of
Alesina and Barro (2002) is derived empirically.
Keywords: anchor currency choice; nested logit; exchange rate regime classification; additive random utility model; currency bloc equilibrium; (follow links to similar papers)
JEL-Codes: C25; E42; F02; F31; F33; (follow links to similar papers)
57 pages, October 15, 2012
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