Working Paper: NBER ID: w25410
Authors: Matteo Maggiori; Brent Neiman; Jesse Schreger
Abstract: The modern notion of an international currency involves use in areas of international finance and trade that extend well beyond central banks' coffers. In addition to their important roles as foreign exchange reserves, international currencies are most frequently used to denominate corporate and government bonds, bank loans, and import and export invoices. These currencies offer unrivaled liquidity, constituting large shares of the volume on global foreign exchange markets, and are commonly chosen as the anchors targeted by countries with pegged or managed exchange rate regimes. In this short article, we provide evidence suggesting a recent rise in the use of the dollar, and fall of the use in the euro, with similar patterns manifesting across all these aspects of international currency use.
Keywords: No keywords provided
JEL Codes: E4; E5; F3; G15; G23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Instability of the eurozone (F65) | Decline in euro use (F36) |
| Instability of the eurozone (F65) | Perceptions of euro's reliability (F36) |
| Perceptions of euro's reliability (F36) | Borrowing behavior (G51) |
| Instability of the eurozone (F65) | Preference for dollar assets (E41) |
| Preference for dollar assets (E41) | Shift in international currency use (F31) |
| Dollar's relative stability during crises (F31) | Increased use of dollar (F31) |
| Statistical evidence (C12) | Significant increase in dollar's share of corporate and sovereign bonds (G15) |
| Statistical evidence (C12) | Decline in euro-denominated bonds (G15) |