Using a two-country general equilibrium model, this paper analytically derives the possibility of positive welfare consequences of vehicle currency use in invoicing international trades. Such vehicle currency use is prominent in the data. The literature points out welfare loss under optimal...

*The European Union will enter Stage Three of Economic and Monetary Union (EMU) in 1999. The development of euro financial markets and thickness externalities in the use of the euro as means of payment will be the major factors determining the importance of the euro as an international currency....

Devaluation of domestic currency is traditionally believed to foster a country's trade balance. Innumerable papers have attempted to scrutinize the exchange rate-trade balance nexus in many countries across the globe, yet their conclusions diverge as they utilize different data, time frames, and...