Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/142801
Authors: 
El-Shagi, Makram
Zhang, Lin
Year of Publication: 
2016
Series/Report no.: 
IWH Discussion Papers 23/2016
Abstract: 
We use the Chinese experience between 1867 and 1910 to illustrate how the volatility of vehicle currencies affects trade. Today's widespread vehicle currency is the dollar. However, the macroeconomic effects of this use of the dollar have rarely been addressed. This is partly due to identification problems caused by its international importance. China had adopted a system, where silver was used almost exclusively for trade, similar to a vehicle currency. While being important for China, the global role of silver was marginal, alleviating said identification problems. We develop a bias corrected structural VAR showing that silver price fluctuations significantly affected trade.
Subjects: 
vehicle currency
China
SVAR
small sample
JEL: 
C32
F14
F31
F41
N15
Document Type: 
Working Paper

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