We explore the major driving forces for currency invoicing in international trade with a simple model and a novel dataset covering 24 countries. We contrasts a “coalescing” effect, where exporters ...minimize the movements of their prices relative to their competitors', with incentives to hedge macroeconomic volatility and transaction costs. The key determinants of invoice currency choice are industry features and country size, with some role for foreign-exchange bid–ask spreads. The coalescing effect also goes a long way to explaining the well-known dominance of the dollar. Trade flows to the United States are predominantly invoiced in dollar, as foreign exporters face competition with U.S. firms. The use of the dollar in trade flows that do not involve the United States reflects trade in homogeneous products where firms need to keep their price in line with their competitors'.
Writing in the June 1965 issue of theEconomic Journal, Harry G. Johnson begins with a sentence seemingly calibrated to the scale of the book he set himself to review: "The long-awaited monetary ...history of the United States by Friedman and Schwartz is in every sense of the term a monumental scholarly achievement--monumental in its sheer bulk, monumental in the definitiveness of its treatment of innumerable issues, large and small . . . monumental, above all, in the theoretical and statistical effort and ingenuity that have been brought to bear on the solution of complex and subtle economic issues."
Friedman and Schwartz marshaled massive historical data and sharp analytics to support the claim that monetary policy--steady control of the money supply--matters profoundly in the management of the nation's economy, especially in navigating serious economic fluctuations. In their influential chapter 7,The Great Contraction--which Princeton published in 1965 as a separate paperback--they address the central economic event of the century, the Depression. According to Hugh Rockoff, writing in January 1965: "If Great Depressions could be prevented through timely actions by the monetary authority (or by a monetary rule), as Friedman and Schwartz had contended, then the case for market economies was measurably stronger."
Milton Friedman won the Nobel Prize in Economics in 2000 for work related toA Monetary Historyas well as to his other Princeton University Press book,A Theory of the Consumption Function(1957).
•Supplier selection with multiple buyers, currency fluctuation uncertainty, and discounts.•High value of the stochastic solution compared to its deterministic counterpart.•Ignoring the currency ...uncertainty in supplier selection may lead to inadequate decisions.•Significant gain in case of global discounts rather than local discounts.
Suppliers network in the global context under price discounts and uncertain fluctuations of currency exchange rates have become critical in today’s world economy. We study the problem of suppliers’ selection in the presence of uncertain fluctuations of currency exchange rates and price discounts. We specifically consider a buyer with multiple sites sourcing a product from heterogeneous suppliers and address both the supplier selection and purchased quantity decision. Suppliers are located worldwide and pricing is offered in suppliers’ local currencies. Exchange rates from the local currencies of suppliers to the standard currency of the buyer are subject to uncertain fluctuations overtime. In addition, suppliers offer discounts as a function of the total quantity bought by the different customer’ sites over the time horizon irrespective of the quantity purchased by each site.
We first provide a literature review on the overlapping items of suppliers’ selection and risk due to currency. Then, we model the problem using the mixed integer scenario-based stochastic programming method. The objective is to minimize the total system expected cost (purchased price+inventory cost+transportation cost+supplier management cost). Finally, we conduct numerical studies to show the value of the proposed model and we discuss some relevant managerial insights into the theory and practice of supply chain management research.
A theory of optimum cryptocurrency scope Marthinsen, John; Gordon, Steven
Economics of innovation and new technology,
02/2021, Letnik:
30, Številka:
2
Journal Article
Recenzirano
Robert Mundell (
1961
. "A Theory of Optimum Currency Areas." The American Economic Review 51 (4): 657-665) framed the fixed-versus-flexible exchange rate controversy in a novel way when he focused ...attention on currency areas and the ingredients necessary for a group of nations to form an optimal currency area (OCA). This paper proposes an analogous theory for cryptocurrencies, called optimal currency scope (OCS), and explains the conditions necessary for an OCS to exist. In contrast to an OCA, which is defined by its non-overlapping geographic areas, an OCS is defined by its multiple-overlapping attributes and the needs they solve, which we call scope. Scopes are not geographic and have fuzzy boundaries; so, the possibility of competing currencies in a single scope needs to be considered. The central issues surrounding an OCS are the optimal number and magnitude of currency attributes, rather than whether nations should adopt fixed versus fluctuating exchange rates. Similar to the findings since Mundell first introduced his OCA Theory, we find that the optimum number of cryptocurrency attributes and, therefore, the optimal number of cryptocurrencies must be determined empirically rather than theoretically.
This paper studies the time series predictability of currency carry trades, constructed by selecting currencies to be bought or sold against the US dollar, based on forward discounts. Changes in a ...commodity index, currency volatility and, to a lesser extent, a measure of liquidity predict in-sample the payoffs of dynamically re-balanced carry trades, as evidenced by individual and joint p-values in monthly predictive regressions at horizons up to six months. Predictability is further supported through out-of-sample metrics, and a predictability-based decision rule produces sizable improvements in the Sharpe ratios and skewness profile of carry trade payoffs. Our evidence also indicates that predictability can be traced to the long legs of the carry trades and their currency components. We test the theoretical restrictions that an asset pricing model, with average currency returns and the mimicking portfolio for the innovations in currency volatility as risk factors, imposes on the coefficients in predictive regressions.
Bitcoin is defined as digital money within a decentralized peer-to-peer payment network. It is a hybrid between fiat currency and commodity currency without intrinsic value and independent of any ...government or monetary authority. This paper analyses the question of whether Bitcoin is a medium of exchange or an asset and more specifically, what is its current usage and what usage will prevail in the future given its characteristics. We analyse the statistical properties of Bitcoin and find that it is uncorrelated with traditional asset classes such as stocks, bonds and commodities both in normal times and in periods of financial turmoil. The analysis of transaction data of Bitcoin accounts shows that Bitcoins are mainly used as a speculative investment and not as an alternative currency and medium of exchange.
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