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M. Otaki, “A Microeconomic Foundation for Optimum Currency Area: The Case for Pefect Capital Mobility and Immobile Labor Forces,” Theoretical Economics Letters, Vol. 2, No. 4, 2012, pp. 399-403. doi:10.4236/tel.2012.24073

has been cited by the following article:

• TITLE: How a Key Currency Functions as an International Liquidity Provision and Insurance System

  AUTHORS: Masayuki Otaki

  KEYWORDS: Key Currency as an Insurance System; Rents from Issuing a Key Currency; International Liquidity; Sovereign Risk

  JOURNAL NAME: Theoretical Economics Letters, Vol.3 No.1, February 26, 2013

  ABSTRACT: Although some previous studies assert that the selection of a key currency is a kind of hysteresis dominated by contingencies, historical evidence suggests that this selection depends on the following two plausible and inevitable economic factors that this study examines: overwhelming industrial power and the possession of huge amounts of foreign assets and gold. Based on the fulfillment of these economic factors, the key-currency country receives rents in return for bearing the sovereign risk and supplying sufficient liquidity to the countries within its network that accept its currency. Thus, the key-currency system can be regarded as an international liquidity provision and insurance system that relies on the economic power of the key-currency country.