TY  - JOUR
AU  - Portes,Richard
AU  - Rey,Helene
TI  - The Emergence of the Euro as an International Currency
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6424
PY  - 1998
Y2  - February 1998
UR  - http://www.nber.org/papers/w6424
L1  - http://www.nber.org/papers/w6424.pdf
N1  - Author contact info:
Richard Portes
London Business School
Regent's Park
London NW1 4SA
UNITED KINGDOM
Tel: 44 (0)  20 7000 8424
Fax:  44 (0) 20 7000 8401
E-Mail: rportes@london.edu

Helene Rey
London Business School
Regents Park
London NW1 4SA
UNITED KINGDOM
Tel: 44 2070008412
E-Mail: hrey@london.edu
AB  - The European Union will enter Stage Three of Economic and Monetary Union (EMU) in 1999. The development of euro financial markets and thickness externalities in the use of the euro as a means of payment will be the major factors determining the importance of the euro as an international currency. As euro securities markets become deeper and more liquid and transactions costs fall, euro assets will become more attractive, and the use of the euro as a vehicle currency will expand; the two effects interact, as we demonstrate. We use a three-region world model as a framework for alternative steady-state scenarios. With forex and securities market data, we assess the plausibility of those scenarios and the implications for economic efficiency (welfare). We find that the euro may take on some of the current roles of the dollar. The welfare analysis reveals potential quantitatively significant benefits for the euro area, at the cost of the US and (to a lesser degree) Japan.
ER  -