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Transactions Use of the Ecu in the Transition to EMU: A Model of Network Externalities

Published online by Cambridge University Press:  17 August 2016

Polly Reynolds Allen
Polly Reynolds Allen*
Affiliation:
University of Connecticut
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Summary

To answer the question under what conditions during the transition to EMU will firms choose the Ecu as their currency for transactions, the paper develops a simple model of a firm’s choice of currency for pricing, invoicing and receiving payments for its product-its transactions currency. The focus of the model is the presence of network externalities derived from use of the same currency by others. The model points up the fallacy of focusing only on relative inflation performances of currencies when judging their likely adoption for transactions purposes.

Résumé

Résumé

La question à laquelle cet article tente de répondre concerne les conditions sous les quelles, au cours de la transition vers l’UME, les entreprises choisiront d’utiliser l’Ecu dans leur transactions? L’article donne un modèle simple du comportement des entreprises quant au choix d’une devise pour la tarification, la facturation et la réception du paiement de ses produits. Le modèle met l’accent sur la présence d’une réseau d’externalités découlant d’utilisation de la même devises par d’autres formes. Il montre qu’il est trompeur de se braquer sur les performances relatives des devises en termes d’inflation lorsqu’on cherche à déterminer la probabilité de leur utilisation dans les transactions.

Keywords

423432423432
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 59 , Issue 1-2: Monetary Integration in Europe , 1993 , pp. 155 - 176
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1993 

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