The Optimal Currency Basket with Input Currency and Output Currency
In: Hong Kong Institute for Monetary and Financial Research (HKIMR) Research Paper WP No. 17/2008
In: Hong Kong Institute for Monetary and Financial Research (HKIMR) Research Paper WP No. 17/2008
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In: World Bank discussion papers 207
World Affairs Online
In: 16 J. Int'l Bus. & L. 26 (Winter 2016)
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In: World review of political economy: journal of the World Association for Political Economy, Band 13, Heft 1
ISSN: 2042-8928
From the perspective of Marx's theory of the functioning of the international monetary system, there are inherent disadvantages in a sovereign currency acting as the world currency. First, the existing model of the single world currency is unfair, with the country whose sovereign currency functions as the world currency able to obtain huge international seigniorage and international inflation tax. Second, this single world currency model is unstable. The premise behind the functioning of an international monetary means of payment is the strong credit of currency-issuing countries, but the Triffin problem means that the sovereign currency issuers face a dilemma. Third, the duality of the monetary measure of value determines that there can be only one currency performing the function of a world currency in the international market, and a multipolar world currency pattern will lead to frictions among currency-issuing countries. Recognizing the disadvantages of using a sovereign currency as the world currency has important reference value and educative significance for achieving a correct view of digital currency, eSDRs, and RMB internationalization.
In: IMF Working Papers
The answer seems affirmative. We compare currency carry trades with an investment strategy based on currency fundamentals: taking a long (short) position in undervalued (overvalued) currencies. Carry trades have high risk-adjusted returns, but are subject to ""crash risk."" In contrast, the fundamental strategy has lower risk-adjusted returns, but is less prone to crash risk, because the realization of crash risk coincides with corrections towards fundamentals. In particular, the fundamental strategy outperformed carry trades during the recent global financial crisis. Building on these results
Abstract. As international financial systems are becoming political tools to manipulate the exchange of money for good, cryptocurrency, and its potential to avoid the international banking system becomes more popular. Thus, the question becomes what happens to the nation's monitory system if cryptocurrency's electronic payment transaction and system replace the current system? Most nation's central bank controls the financial systems, which affect institutions, rules, regulations, and laws of the land that affect this system. Robinson (2016) suggests money as a commodity in the national scope. International banks use BIC for transferring money with each other. Cryptocurrency, so far, does not need BIC to transfer money from one location to another. Bitcoin, the system is a peer-to-peer internet currency allowing verified, and decentralized transfers of value between individuals and businesses. This article is a short introduction discussing the legacy money and cryptocurrency and the potential of cryptocurrency as a new currency and its possible implications.Keywords. Cryptocurrency, Blockchain, Currency, Money, Bitcoin, BIC, SWIFT.JEL. O30, O35, O36.
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In: IMF Working Papers, S. 1-33
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In: International Review of Financial Analysis, Band 17, Heft 4, S. 647-663
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This paper applies a two-country framework that allows for currency substitution in an environment in which policymakers optimally vary interest rates in light of utility-based objectives, one country pegs the value of its currency to the other nation's currency, and government revenue is generated via explicit taxes and seigniorage. The analysis illustrates the roles that currency substitution, currency preferences, and efficiency of tax systems play in contributing to the likelihood of a "run" on one nation's currency. We explore how these factors interact to influence the probability of a currency crisis in the country that fixes its exchange rate.
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In: IMF Working Papers, S. 1-0
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In: Journal of development economics, Band 69, Heft 2, S. 367-391
ISSN: 0304-3878
Currency risk is one of the two components of the total interest rate differential. Hard pegs, such as currency boards, are meant to reduce or even eliminate currency risk, thus reducing domestic interest rates. This paper investigates the patterns and determinants of the currency risk premium in two currency boards - Argentina and Hong Kong. Despite the presumed rigidity of currency boards, the currency premium is almost always positive and at times very large. Its term structure is usually upward sloping, but flattens out or even becomes inverted at times of turbulence. The premium and its term structure depend on domestic and global factors, related to devaluation expectations and risk perceptions. (DSE/DÜI)
World Affairs Online
In: Discussion paper 01/15
We develop a dual currency search model to study equilibrium currency exchange and the determination of nominal exchange rates. Agents hold portfolios consisting of two distinct currencies. We study equilibria in which the two currencies are identical and equilibria in which the two currencies differ according to their relative purchasing power risk. We use numerical methods to solve for the steady-state distributions of currency portfolios, nominal exchange rates and value functions. When one of the currencies is 'risky', equilibria exist in which the safe currency trades for multiple units of the risky currency with the observed ratio being the nominal exchange rate. However, due to the decentralized trading environment, we obtain a steady state distribution of nominal exchange rates. The mean and variance of the nominal exchange rate distribution are based on the fundamentals of the model and change in predictable ways when the fundamentals change.
In: CEPR Discussion Paper No. DP13923
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Working paper
In: The journal of development studies: JDS, Band 37, Heft 3, S. 21-38
ISSN: 0022-0388