Working Paper: NBER ID: w11336
Authors: Barry Eichengreen
Abstract: This paper provides an historical perspective on reserve currency competition and on the prospects of the dollar as an international currency. It questions the conventional wisdom that competition for reserve-currency status is a winner-take-all game, showing that several currencies have often shared this role in the past and arguing that innovations in financial markets make it even more likely that they will do so in the future. It suggests that the dollar and the euro are likely to share this position for the foreseeable future. Hopes that the yuan could become a major international currency 20 or even 40 years from now are highly premature.
Keywords: reserve currency; dollar; euro; currency competition; financial markets
JEL Codes: F0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| U.S. economic policies (E65) | currency stability (F31) |
| historical currency transitions (F31) | current perceptions (E66) |
| financial innovations (O16) | shared reserve currency roles (F33) |
| dollar's current account deficit (F32) | decline in dollar's attractiveness as a reserve currency (F31) |
| U.S. substantial foreign debt (F34) | decline in dollar's attractiveness as a reserve currency (F31) |
| historical evidence of dollar and sterling coexisting (N11) | multiple currencies can share reserve status (F31) |