INERTIA IN THE KEY CURRENCY

This paper empirically analyzes inertia in the position of the dollar as the key currency. We extend a money-in-the-utility model to one wit h parallel international currencies. We use an extended model to estim ate a parameter in the utility function. Also, given the estimated par ameter, we simulate a relation between depreciation and share of the d ollar. The result indicates that the share of the dollar will not decr ease even if the dollar depreciates at a moderate rate. Thus the dolla r will keep its position as the key currency - inertia works in the ke y currency. (C) 1998 Elsevier Science B.V.