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On the International Use of Currencies George S. Tavlas Essays in International Finance No. 181
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| Are we moving toward as tripartite monetary system, centered on the dollar, the deutsche mark, and the yen? This essay offers arguments and evidence that point to a growing role for the deutsche mark. It identifies conditions that promote the use of a national currency in global markets. Two, a relatively low and stable inflation rate and open financial markets, are fundamental. Others that supplement these two include the share the country has in world exports, the share of differentiated manufactured goods in the country's total exports, and the size of the country's trade with developing countries. All of these have favored the growing use of the deutsche mark. A paradox is that the emergence of the deutsche mark as the key European currency has accelerated European monetary integration, which may produce a new currency that may displace the deutsche mark as an international currency. |
