Abstract
The coexistence of different convertible currencies, like all competition, has always been peaceful, but never without effect. In the 1970’s, for example, the US dollar repeatedly came under strong competitive pressure from the D-mark and the Swiss franc which helped to get US monetary policy back on an anti-inflationary track. The empirical analysis (see Vaubel, 1980) shows that the demand for money shifted between different currencies in response to changes in exchange-rate expectations or, which is the same, in interest-rate differentials and ultimately in expected inflation differentials. Since the expectation of a depreciation (a forward discount) of the home currency implies that the interest rate is higher in the home country than abroad, it is, contrary to widespread opinion, the country with low interest rates which will see its money favoured by currency substitution in demand and insofar appreciate.
Frédéric Boyer de la Giroday died at the end of 1981. All those who knew him deeply felt his death. He was a man of great culture, always ready to converse with passion — especially on the field of monetary problems — and a sense of respect for others and for their ideas, which one could not but admire. The combination of his qualities — cleverness, kindness, efficiency and energy — made him a unique personality (editor’s note).
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Vaubel, R., Shenfield, A., Boyer de la Giroday, F., Liggio, L.P. (1984). The history of currency competition. In: Salin, P. (eds) Currency Competition and Monetary Union. Financial and Monetary Policy Studies, vol 8. Springer, Dordrecht. https://doi.org/10.1007/978-94-009-6077-0_3
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