Working Paper: NBER ID: w2345
Authors: Michael D. Bordo; Anna J. Schwartz
Abstract: 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.
Keywords: ECU; monetary integration; historical analysis; money; financial markets
JEL Codes: E42; E58; F31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| ecu's current status (E66) | ecu as an embryonic form of money (E42) |
| true fixed exchange rate system within the EEC (F33) | ecu's acceptance as a means of payment (E42) |
| weaknesses of existing currencies (F31) | emergence of the ecu as a private financial instrument (F36) |
| private sector dynamics (O17) | monetary evolution (E42) |
| market acceptance (L17) | ecu's future viability as a currency (F36) |