When is a Global Currency Optimal?

The purpose of this paper is to examine what factors make an individual, exporting firm choose to denominate its price(s) in the same currency for multiple markets in different countries. The unique model herein maintains an endogenous frequency of price adjustment, price discrimination and currency of denomination. The representative firm is likely to choose a global price (one price in one currency for all countries) based mostly on macro economic and industry-specific characteristics. Exchange rate transaction costs, exchange rate volatility and market size consistently impact the optimality of the use of a global currency.