What is it about?
This is a proposal for an international unit of account that represents stable purchasing power. It is based on a basket of major currencies weighted by the respective GDPs of their countries. By indexing against inflation, the real purchasing power of each unit is preserved.
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Why is it important?
It can serve as a unit for international settlement of debt and for commodity quotations. Since every currency is subject to variations in purchasing power, only quotations and settlements in a unit of account designed for the purpose can render real price and real interest movements transparent. As settlement can be in any currency according to the prevailing price of the WCU in that currency, no currency is above others, and all currencies are on an equal footing.
Perspectives
The unit is practical, and international settlement of money owed can be done in any currency at prevailing exchange rates between the WCU and the currencies. All currencies are then on equal footing.
Prof. Lok Sang Ho
Lingnan University
Read the Original
This page is a summary of: In search of a unit of stable global purchasing power, International Review of Economics & Finance, July 2018, Elsevier,
DOI: 10.1016/j.iref.2018.03.021.
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