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on Open Economy Macroeconomics |
| By: | KANO, Kazuko; KANO, Takashi |
| Abstract: | This paper studies how currency conversion can disrupt relative prices by impairing the unit-ofaccount function of money. We examine Okinawa’s 1972 conversion from the U.S. dollar to the Japanese yen, following the collapse of a previously shared unit-of-account triggered by the Nixon shock. Using wholesale price data for perishable goods, we showthat relative prices exhibited sharp changes despite flexible prices. By contrast, Okinawa’s 1958 currency conversion used a single, clearly announced rate and left relative prices stable. The comparison highlights the importance of institutional clarity for a shared unit of account and stable relative prices. |
| Keywords: | Unit of Account, Monetary Singleness, Relative Price Distortion, Currency Conversion, Okinawa Reversion |
| JEL: | E42 E31 D40 N15 |
| Date: | 2026–01–24 |
| URL: | https://d.repec.org/n?u=RePEc:hit:hiasdp:hias-e-155 |
| By: | Joseph Abadi (Federal Reserve Bank of Philadelphia); Jesús Fernández-Villaverde (University of Pennsylvania, NBER, and CEPR); Daniel Sanches (Federal Reserve Bank of Philadelphia) |
| Abstract: | We present a micro-founded monetary model of the world economy to study international currency competition. Our model features “unipolar” equilibria, with a single dominant international currency, and “multipolar” equilibria, in which multiple currencies circulate internationally. Long-run equilibria are highly history-dependent and tend towards the emergence of a dominant currency. Governments can compete to internationalize their currencies by offering attractive interest rates on their sovereign debt, but large economies have a natural advantage in ensuring the dominance of their currencies. We calibrate the model to assess the quantitative importance of these mechanisms and study the international monetary system’s dynamics under several counterfactual scenarios. |
| Keywords: | Dominant currency, international monetary system, strategic complementarities, history dependence |
| JEL: | E42 E58 G21 |
| Date: | 2026–01–28 |
| URL: | https://d.repec.org/n?u=RePEc:pen:papers:26-003 |
| By: | Ṣebnem Kalemli-Özcan; Can Soylu; Muhammed A. Yildirim |
| Abstract: | We analyze how tariff uncertainty affects exchange rates, motivated by the U.S. dollar’s depreciation after the 2025 tariff announcements. Standard macro-trade models predict that unilateral tariffs appreciate the implementing country’s currency, but we show this result can be overturned by policy uncertainty. We build a two-country general equilibrium model with risk-averse agents and segmented financial markets, where tariff volatility enters uncovered interest parity through a risk-premium wedge. Higher tariff uncertainty increases precautionary savings and risk premia, leading to immediate currency depreciation even as tariffs rise. Quantitatively, the model replicates the size and timing of the observed dollar depreciation episode dynamics. |
| JEL: | E0 F3 F40 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34728 |
| By: | Irigoin, Alejandra |
| Abstract: | By specifying the specie on which returns were to be repaid respondentia was a ubiquitous financial instrument to carry international trade in which silver was “essential” for its continuation. Where multiple currencies existed and silver was the preferred money, imported silver species performed as foreign currency. Thus, the import of foreign coins created issues for prices, profits and exchange rates. Eighteenth century Europeans alternatively used respondentia or bills depending on the monetary context, casting a shade of doubt on the inherent efficiency of a cashless means of payment. Until the 1820s, private bills of exchange did not circulate where cash had a premium. Europeans developed means to regulate the price of foreign coins and exchange rates. Elsewhere respondentia allowed to hedge against exchange risk and propitiated arbitrage profits, giving an advantage over bills. The article documents the global scope of the instrument; it explains the exchange nature of the contract and explores the issues that respondentia came to solve. It highlights the role of monies of account Europeans used in pricing foreign currencies in international trade. |
| Keywords: | private maritime trade finance; early modern global commerce; exchange risk; monies of account |
| JEL: | N20 F31 G23 G14 |
| Date: | 2025–04–29 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:wpaper:128607 |
| By: | Marija Trpkova - Nestorovska (Faculty of Economics-Skopje, Ss. Cyril and Methodius University in Skopje, North Macedonia); Katarina Gacova (Faculty of Economics-Skopje, Ss. Cyril and Methodius University in Skopje, North Macedonia) |
| Abstract: | This paper investigates the determinants of GDP growth in nine Western Balkan countries over the period 2000 – 2023 using an unbalanced panel dataset. The analysis incorporates gross fixed capital formation, exports and imports of goods and services, final and household consumption, labor force growth, and inflation as explanatory variables. To address cross-sectional dependence and unobserved heterogeneity, the study employs a three-model econometric framework, including two-way fixed effects, correlated random effects, and random effects specifications. The results demonstrate that investment, exports, and final consumption are the most robust and statistically significant drivers of GDP growth, while imports consistently exert a negative effect. Labor force growth is positively associated with output but only becomes significant under more robust specifications, whereas inflation shows no systematic impact. The findings highlight the dual role of external competitiveness and domestic demand in sustaining growth, while underscoring structural vulnerabilities linked to import dependence and weak labor market absorption. |
| Keywords: | GDP growth, Western Balkans, Panel regression, Investment, Trade, Consumption |
| JEL: | C23 E21 E22 F43 O52 |
| Date: | 2025–12–15 |
| URL: | https://d.repec.org/n?u=RePEc:aoh:conpro:2025:i:6:p:194-203 |