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Currency Competition and Foreign Exchange Markets is a major new theoretical and empirical study of international currencies that focuses on the role the Euro (the future European currency) will play in the international monetary and financial system, along with the US dollar and the Japanese yen. In contrast to much of the existing literature that approaches the subject from a macroeconomic perspective, Philipp Hartmann develops a theoretical model that uses game theory, time series and panel econometrics, and links financial markets analysis with transaction cost economics. The results are presented with reference to political, historical and institutional considerations, and provide accessible answers to policy makers, business people and scholars world wide.
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Currency Competition and Foreign Exchange Markets: The Dollar, the Yen and the Euro Philipp Hartmann Cambridge University Press Currency Competition and Foreign Exchange Markets The Dollar, the Yen and the Euro Currency Competition and Foreign Exchange markets by Philipp Hartmann is a major new theoretical and empirical study of international currencies, which focuses on the role which the euro (the future single European currency) will play, along with the US dollar and the Japanese yen, in the international monetary and ®nancial system. In contrast with much of the existing literature, which approaches the subject from a macroeconomic perspective, Hartmann develops theoretical and empirical models which use game theory, time series and panel econometrics, and link ®nancial market micro-structure analysis with transaction cost economics. The results of Currency Competition and Foreign Exchange Markets are presented with reference to political, historical and institutional considerations, and provide accessible answers for policy-makers, business people and scholars world-wide. The sections on spread estimation and multiple vehicles with interdealer price and entry competition will be of particular use for ®nance professionals. is an economist at the European Central Bank in Frankfurt. He formerly worked in the Financial Markets Group at the London School of Economics. He is widely regarded as one of the leading young economists in Europe, and his work has been featured on BBC Radio 4 (UK) and in publications including Le Figaro (France), The Wall Street Journal and the Frankfurter Allgemeine Zeitung ± Blick durch die Wirtschaft (Germany). His previous writings include the monograph Financial Regulation: Why, How and Where Now? (with Professor Charles Goodhart et al.) and numerous articles published in leading academic and policy journals. This Page Intentionally Left Blank Currency Competition and Foreign Exchange Markets The Dollar, the Yen and the Euro Philipp Hartmann PUBLISHED BY CAMBRIDGE UNIVERSITY PRESS (VIRTUAL PUBLISHING) FOR AND ON BEHALF OF THE PRESS SYNDICATE OF THE UNIVERSITY OF CAMBRIDGE The Pitt Building, Trumpington Street, Cambridge CB2 IRP 40 West 20th Street, New York, NY 10011-4211, USA 477 Williamstown Road, Port Melbourne, VIC 3207, Australia http://www.cambridge.org © Philipp Hartmann 1998 This edition © Philipp Hartmann 2003 First published in printed format 1998 A catalogue record for the original printed book is available from the British Library and from the Library of Congress Original ISBN 0 521 63273 0 hardback ISBN 0 511 00891 0 virtual (netLibrary Edition) Contents List of ®gures List of tables Preface and acknowledgements 1 Introduction 1.1 Importance of currency internationalization and European Monetary Union 1.2 Pivotal role of forex markets 1.3 Overview of the book page vii viii xi 1 2 5 7 2 National and international money: a survey 11 3 A the