The Relationship between dollar and euro on the basis of game theory

Document Type : Research Article

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Abstract

Since 2000, the economic and political deals have been dramatically changed due to the arrival of the euro in to the global currency market. Moreover, the euro currency had an influence on contribution of business trade and other currencies. However, it had a great impact on dollar as worldwide important money. At the moment after 15 years of emergence of euro in to the international finance, it seems that there is passing game between dollar and euro.  Nowadays, the investigation of relation between international variables is highly taken in to account due to improvement of international relations particularly in field of economy. The success in international market and adoption of appropriate currency and financial strategy heavily depend on recognition of international environment, variables and influential players. In this regard, the importance of currency issues is considerably high. Throughout last decade, it was observed that in addition to US dollar, the euro have had an extensive presence. This issue led to changing currency policy of countries in which to consider euro against dollar in to their currency basket. The selection of importance ratio of these two powerful money in currency basket may be decisive.  It seems that the relation between these two money can be defined not only in business deal but also in form of the game theory. This study is allocated to examine the action and reaction of these two currencies in the international environment. To accomplish this goal, the game theory and statistical model leader - satellite were used. Results indicate that the agreement between euro and dollar has been achieved after one decade struggle in prices. Furthermore, it is concluded that with respect to the proportion of these two currencies in international trade, there is Nash equilibrium in their game. Also, it is worth noting to say that after the crisis and the recent recession in Europe, dollar still plays key role and euro is follower. Other foreign currencies could also achieve satisfactory share of the market. 

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References

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Journal of Applied Economics Studies in Iran
Volume 6, Issue 21
May 2017
Pages 75-97

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