A stable aggregate currency revisited: Highlighting some fundamental issues

Kunkler, M. ORCID: https://orcid.org/0000-0001-8367-4331 (2023) A stable aggregate currency revisited: Highlighting some fundamental issues. Economics Letters, 231. 111267. ISSN 0165-1765 doi: 10.1016/j.econlet.2023.111267

Abstract/Summary

A multicurrency numéraire is a weighted basket of currencies, where the weights sum to zero and all weights are positive. A stable aggregate currency is an optimal multicurrency numéraire, which is estimated using a minimum-variance portfolio optimisation. The variables of the portfolio optimisation are invariant currency indexes, which are multilateral exchange rates and are priced in terms of an equally-weighted basket of the currencies. This paper shows that there are some fundamental issues with the concept of a stable aggregate currency. Once these issues have been resolved, it is shown that the portfolio optimisation problem is infeasible.

Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/112928
Identification Number/DOI	10.1016/j.econlet.2023.111267
Refereed	Yes
Divisions	Arts, Humanities and Social Science > School of Politics, Economics and International Relations > Economics
Publisher	Elsevier
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