The ECU - An Imaginary or Embryonic Form of Money: What Can We Learn from History?

Michael D. Bordo, Anna J. Schwartz

NBER Working Paper No. 2345 (Also Reprint No. r1215)
Issued in August 1987
NBER Program(s):Monetary Economics, International Trade and Investment, International Finance and Macroeconomics

We present historical examples of new forms of money that can be com- pared with the ECU. We first define the ECU in its official role before turning to developments in the private market for ECUs. We then examine historical antecedents of three attributes of ECUs: a unit of account; a basket of currencies; a basis for monetary integration. We discuss which features if any of ECUs are unique, and the contribution of the historical analysis to assessing the future of ECUs. We then ask whether governments or markets have been dominant in the emergence of new forms of money. Whatever emerges as money in an economy becomes the general means of payment. Prices of commodities, services, and bonds are expressed in units of the money. Buyers use the money to purchase goods or bonds and sellers receive the money is exchange for goods or bonds. We conclude that, at this stage in its history, the ECU at best is an embryonic form of money, closer to historical imaginary monies than to existing currencies that the world has known.

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Document Object Identifier (DOI): 10.3386/w2345

Published: From The ECU and European Monetary Integration, edited by Paul DeGrauwe and Theo Peeters, pp. 1-21. London: Macmillan Press Ltd., 1989.

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