{
  "title": "International Currencies and Endogenous Enforcement: An Empirical Analysis",
  "publication": "IMF Working Papers, March 1, 1997",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/30/international-currencies-and-endogenous-enforcement-an-empirical-analysis-2135",
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  "summary": "This paper investigates the determinants of the international role of a currency. It argues that standard determinants such as monetary performance and financial openness are at best imperfect indicators of a currency’s stability prospects, because the issuer’s promise of stability is not exogenousl",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Author: Roohi Prem\n- Date: March 1, 1997\n- Purpose: Investigates the determinants of the international role of a currency and advocates an enforcement approach that makes explicit underlying incentive incompatibilities.\n- Core argument: Standard determinants such as monetary performance and financial openness are at best imperfect indicators of a currency’s stability prospects because the issuer’s promise of stability is not exogenously enforceable."
    },
    {
      "heading": "Analytical framework",
      "content": "- Conceptual shift: Emphasis on endogenous enforcement mechanisms for international currencies rather than treating stability promises as exogenously enforceable.\n- Additional determinants: Identifies enforcement determinants of currency internationalization beyond standard monetary-performance and financial-openness indicators.\n- Incentive incompatibilities: Framework explicitly models the incentive incompatibilities between currency issuers and users that affect internationalization."
    },
    {
      "heading": "Empirical strategy",
      "content": "- Method: Model estimated using time-series cross-sectional analysis.\n- Data: Three data sets used for estimation (three data sets described in the source).\n- Comparative test: Evaluates explanatory power of standard monetary-performance-related determinants versus enforcement determinants."
    },
    {
      "heading": "Key empirical findings",
      "content": "- Monetary performance-related standard determinants fail to exhibit explanatory power.\n- Enforcement determinants are strongly significant and robust.\n- Implication: Enforcement considerations are critical in explaining currency internationalization outcomes, more so than traditional stability indicators."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Reorient analysis and policy toward enforcement mechanisms that address incentive incompatibilities between currency issuers and international users.\n- Recognize limits of relying solely on monetary performance and financial openness as indicators of a currency’s international role and stability prospects.\n\n---\n\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/international-currencies-and-endogenous-enforcement-an-empirical-analysis-2135"
    }
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    "Authors: Roohi Prem",
    "Published: March 1, 1997",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451844764.001",
    "Author: Roohi Prem",
    "Date: March 1, 1997",
    "Purpose: Investigates the determinants of the international role of a currency and advocates an enforcement approach that makes explicit underlying incentive incompatibilities.",
    "Core argument: Standard determinants such as monetary performance and financial openness are at best imperfect indicators of a currency’s stability prospects because the issuer’s promise of stability is not exogenously enforceable.",
    "Conceptual shift: Emphasis on endogenous enforcement mechanisms for international currencies rather than treating stability promises as exogenously enforceable.",
    "Additional determinants: Identifies enforcement determinants of currency internationalization beyond standard monetary-performance and financial-openness indicators.",
    "Incentive incompatibilities: Framework explicitly models the incentive incompatibilities between currency issuers and users that affect internationalization.",
    "Method: Model estimated using time-series cross-sectional analysis.",
    "Data: Three data sets used for estimation (three data sets described in the source).",
    "Comparative test: Evaluates explanatory power of standard monetary-performance-related determinants versus enforcement determinants.",
    "Monetary performance-related standard determinants fail to exhibit explanatory power.",
    "Enforcement determinants are strongly significant and robust.",
    "Implication: Enforcement considerations are critical in explaining currency internationalization outcomes, more so than traditional stability indicators.",
    "Reorient analysis and policy toward enforcement mechanisms that address incentive incompatibilities between currency issuers and international users.",
    "Recognize limits of relying solely on monetary performance and financial openness as indicators of a currency’s international role and stability prospects."
  ],
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