IDEAS home Printed from https://ideas.repec.org/a/eee/reveco/v56y2018icp99-108.html
   My bibliography  Save this article

In search of a unit of stable global purchasing power

Author

Listed:
  • Ho, Lok Sang

Abstract

This paper introduces an improved version of the "World Currency Unit" (Ho, 2000), a synthetic unit of account representing constant real purchasing power. If commodity prices and bonds are quoted in this unit while allowing settlement in any currency, real prices and real interest rates will become more transparent. We show that the real prices of commodities are sensitive to movements in the nominal exchange value of the US dollar, and that they are Granger-caused by movements in the US dollar's nominal effective exchange rate. The proposed unit has implications for efficiency and the stability of the international monetary order.

Suggested Citation

  • Ho, Lok Sang, 2018. "In search of a unit of stable global purchasing power," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 99-108.
    • Handle: RePEc:eee:reveco:v:56:y:2018:i:c:p:99-108
    DOI: 10.1016/j.iref.2018.03.021
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1059056018302582
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.iref.2018.03.021?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Barry Eichengreen & Ricardo Hausmann & Ugo Panizza, 2007. "Currency Mismatches, Debt Intolerance, and the Original Sin: Why They Are Not the Same and Why It Matters," NBER Chapters, in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences, pages 121-170, National Bureau of Economic Research, Inc.
    2. Miller, Marcus H & Weller, Paul, 1990. "Currency Bubbles Which Affect Fundamentals: A Qualitative Treatment," Economic Journal, Royal Economic Society, vol. 100(400), pages 170-179, Supplemen.
    3. Qin, Duo & Tan, Tao, 2009. "How much intraregional exchange rate variability could a currency union remove? The case of ASEAN+3," Journal of Banking & Finance, Elsevier, vol. 33(10), pages 1793-1803, October.
    4. Nils Bjorksten & Anne-Marie Brook, 2002. "Exchange rate strategies for small open developed economies such as New Zealand," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 65, March.
    5. Hovanov, Nikolai V. & Kolari, James W. & Sokolov, Mikhail V., 2007. "Synthetic money," International Review of Economics & Finance, Elsevier, vol. 16(2), pages 161-168.
    6. Irving Fisher, 1913. "A Compensated Dollar," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 27(2), pages 213-235.
    7. George Hoguet & Solomon Tadesse, 2011. "The role of SDR-denominated securities in official and private portfolios," BIS Papers chapters, in: Bank for International Settlements (ed.), Portfolio and risk management for central banks and sovereign wealth funds, volume 58, pages 165-186, Bank for International Settlements.
    8. Hovanov, Nikolai V. & Kolari, James W. & Sokolov, Mikhail V., 2004. "Computing currency invariant indices with an application to minimum variance currency baskets," Journal of Economic Dynamics and Control, Elsevier, vol. 28(8), pages 1481-1504, June.
    9. Scott H. Irwin & Dwight R. Sanders, 2010. "The Impact of Index and Swap Funds on Commodity Futures Markets: Preliminary Results," OECD Food, Agriculture and Fisheries Papers 27, OECD Publishing.
    10. Ho, Lok Sang, 2012. "Globalization, exports, and effective exchange rate indices," Journal of International Money and Finance, Elsevier, vol. 31(5), pages 996-1007.
    11. Lok Sang Ho, 2000. "Towards a New International Monetary Order: The World Currency Unit and the Global Indexed Bond," The World Economy, Wiley Blackwell, vol. 23(7), pages 939-950, July.
    12. Masahiro Kawai, 2008. "Toward A Regional Exchange Rate Regime In East Asia," Pacific Economic Review, Wiley Blackwell, vol. 13(1), pages 83-103, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pontines, Victor, 2015. "How useful is an Asian Currency Unit (ACU) index for surveillance in East Asia?," Economic Systems, Elsevier, vol. 39(2), pages 269-287.
    2. Zhang, Zhichao & Shi, Nan & Zhang, Xiaoli, 2011. "China’s new exchange rate regime, optimal basket currency and currency diversification," MPRA Paper 32642, University Library of Munich, Germany.
    3. repec:zbw:bofitp:2011_019 is not listed on IDEAS
    4. Jin, Jiayu & Han, Liyan & Xu, Yang, 2022. "Does the SDR stabilize investing in commodities?," International Review of Economics & Finance, Elsevier, vol. 81(C), pages 160-172.
    5. Zhang, Zhichao & Shi, Nan & Zhang, Xiaoli, 2011. "China’s new exchange rate regime, optimal basket currency and currency diversification," MPRA Paper 32642, University Library of Munich, Germany.
    6. Masahiro Kawai, 2014. "Asian Monetary Integration : A Japanese Perspective," Governance Working Papers 24158, East Asian Bureau of Economic Research.
    7. Martin Melecky, 2012. "Choosing The Currency Structure Of Foreign‐Currency Debt: A Review Of Policy Approaches," Journal of International Development, John Wiley & Sons, Ltd., vol. 24(2), pages 133-151, March.
    8. Koichi Hamada & Asahi Noguchi, 2005. "The Role of Preconceived Ideas in Macroeconomic Policy: Japan's Experiences in the Two Deflationary Periods," Working Papers 908, Economic Growth Center, Yale University.
    9. Zhang, Dalu, 2014. "Vine copulas and applications to the European Union sovereign debt analysis," International Review of Financial Analysis, Elsevier, vol. 36(C), pages 46-56.
    10. Bernardina Algieri, 2014. "A roller coaster ride: an empirical investigation of the main drivers of the international wheat price," Agricultural Economics, International Association of Agricultural Economists, vol. 45(4), pages 459-475, July.
    11. Edwards, Sebastian, 2020. "Change of monetary regime, contracts, and prices: Lessons from the great depression, 1932–1935," Journal of International Money and Finance, Elsevier, vol. 108(C).
    12. Aizenman, Joshua & Sun, Yi, 2012. "The financial crisis and sizable international reserves depletion: From ‘fear of floating’ to the ‘fear of losing international reserves’?," International Review of Economics & Finance, Elsevier, vol. 24(C), pages 250-269.
    13. Eiji Fujii, 2024. "Currency concentration in sovereign debt, exchange rate cyclicality, and volatility in consumption," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 160(1), pages 169-192, February.
    14. Brutti, Filippo, 2008. "Legal enforcement, public supply of liquidity and sovereign risk," MPRA Paper 13949, University Library of Munich, Germany.
    15. Michael Kunkler, 2023. "Synthetic money: Addressing the budget‐constraint issue," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(4), pages 3774-3788, October.
    16. Husnu C. Dalgic, 2018. "Financial Dollarization in Emerging Markets: An Insurance Arrangement," CRC TR 224 Discussion Paper Series crctr224_051_2018, University of Bonn and University of Mannheim, Germany.
    17. Dimic, Nebojsa & Piljak, Vanja & Swinkels, Laurens & Vulanovic, Milos, 2021. "The structure and degree of dependence in government bond markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 74(C).
    18. Philip R. Lane & Jay C. Shambaugh, 2010. "Financial Exchange Rates and International Currency Exposures," American Economic Review, American Economic Association, vol. 100(1), pages 518-540, March.
    19. William Arrata & Alejandro Bernales & Virginie Coudert, 2013. "The Effects of Derivatives on Underlying Financial Markets: Equity Options, Commodity Derivatives and Credit Default Swaps," SUERF 50th Anniversary Volume Chapters, in: Morten Balling & Ernest Gnan (ed.), 50 Years of Money and Finance: Lessons and Challenges, chapter 13, pages 445-473, SUERF - The European Money and Finance Forum.
    20. Alfredo Pistelli & Jorge Selaive & Rodrigo O. Valdés, 2008. "Stocks, Flows, and Valuation Effects of Foreign Assets and Liabilities: Do They Matter?," Central Banking, Analysis, and Economic Policies Book Series, in: Kevin Cowan & Sebastián Edwards & Rodrigo O. Valdés & Norman Loayza (Series Editor) & Klaus Schmidt- (ed.),Current Account and External Financing, edition 1, volume 12, chapter 7, pages 237-277, Central Bank of Chile.
    21. Andrew Filardo & Marco Jacopo Lombardi, 2014. "Has Asian emerging market monetary policy been too procyclical when responding to swings in commodity prices?," BIS Papers chapters, in: Bank for International Settlements (ed.), Globalisation, inflation and monetary policy in Asia and the Pacific, volume 77, pages 129-153, Bank for International Settlements.

    More about this item

    Keywords

    Synthetic unit of account; Inflation indexing; Real price discovery; Efficiency; International monetary architecture;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:reveco:v:56:y:2018:i:c:p:99-108. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620165 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.