THE FUTURE-ROLE OF THE EURO - A HISTORICA L-PERSPECTIVE

The introduction of the euro in 1999 raises the question whether the e uro will challenge the dominant position of the US dollar in the inter national money market. Even if the EMU area becomes economically domin ant, both in size of the underlying economy and in global trade, there are reasons to believe that it will take time before the euro might d ominate the international currency markets. It took almost 50 years be fore the US dollar seized the position of the pound sterling. One impo rtant factor is whether the euro becomes a dominant vehicle currency. Economies of scale in the transaction costs make history important. On ce established as an international medium of exchange the currency can persist in that role even if the country's economic importance declin es. On the other hand new technology might lower transaction costs, ma king possible several equally important national currencies in the fut ure.