On The Welfare Benefits of an International Currency

Author/Editor:

Prakash Kannan

Publication Date:

March 1, 2007

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Is it beneficial for a country's currency to be used internationally? And, if so, can we quantify the benefit? Since the emergence of the euro, there has been great interest in the consequences of a transfer of the US dollar's premier international role to the euro. Building on recent advancements in the literature on search models of money, this paper presents a novel model-based approach towards assessing the welfare benefits associated with the international use of a country's currency. The welfare gain for the Euro area in having the euro internationally used ranges from 1.7% to 2.1% of consumption.

Series:

Working Paper No. 2007/049

Subject:

Consumption Currencies Demand for money Inflation Monetary base

English

Publication Date:

March 1, 2007

ISBN/ISSN:

9781451866131/1018-5941

Stock No:

WPIEA2007049

Pages:

37

Please address any questions about this title to publications@imf.org