Arbeitspapier

Choosing an anchor currency for the Pacific

This paper analyses currency options for six Pacific states - Fiji, Papua New Guinea, Samoa, Solomon Islands, Tonga and Vanuatu - that issue their own currencies. Empirical estimates indicate that these states already stabilize their currencies against the US dollar because of their large and increasing trade with emerging Asia which denominates its trade in US dollars. Building on the theory of an optimal peg, we argue that the replacement of present currencies by the US dollar would strengthen these countries´ trade. Gravity model estimations indicate that adopting a common external currency would be a major stimulus to Pacific trade. While the Australian dollar has been suggested because of the Pacific´s traditional trade relations with Australia this choice would be the result of a reverse causality bias. A binary choice method is applied to trace endogeneity biases in the Pacific sample. The gains for trade from the adoption of an external currency are lower but remain positive.

Sprache
Englisch

Erschienen in
Series: cege Discussion Papers ; No. 112

Klassifikation
Wirtschaft
Single Equation Models; Single Variables: Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions
Economic Integration
International Monetary Arrangements and Institutions
Thema
Currency regimes
gravity model
binary choice
Pacific
Wechselkurssystem
US-Dollar
Außenhandelseffekt
Gravitationsmodell
Schätzung
Pazifischer Raum

Ereignis
Geistige Schöpfung
(wer)
Freitag, Stephan
Ereignis
Veröffentlichung
(wer)
University of Göttingen, Center for European, Governance and Economic Development Research (cege)
(wo)
Göttingen
(wann)
2010

Handle
Letzte Aktualisierung
10.03.2025, 11:42 MEZ

Datenpartner

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Objekttyp

  • Arbeitspapier

Beteiligte

  • Freitag, Stephan
  • University of Göttingen, Center for European, Governance and Economic Development Research (cege)

Entstanden

  • 2010

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