One region, one money?

The article explores causes and consequences of the declining usefulness of the separate currency denominations maintained by the large number of small open economies whose currencies play little or no role in international finance. Pressures for currency consolidation arise from several sources related to political liberalization, economic globalization, and the information and communications technology revolution. Freer cross-border provision of financial services and a changed official attitude to foreign establishment and takeovers have encouraged foreign entry. Many regional and global electronic spot markets and electronic trading platforms price in U.S. dollars or, prospectively, in euro. Cross-border e-banking, e-investing, and e-ordering of all kinds may compete not only with domestic financial and business establishments but also with local currencies that provide inferior consumption insurance at currency-crisis cycle frequencies and inadequate intertemporal predictability of purchasing power and other "real" terms of contract at longer frequencies.