Working Paper: NBER ID: w31024
Authors: Javier Bianchi; César Sosapadilla
Abstract: We propose a simple monetary model to investigate the implications of international financial sanctions for the reserve currency status of the US dollar. We show how the anticipation of financial sanctions can reduce the US dollar convenience yield and the holdings of US dollar reserves. We also evaluate the implications for welfare and show that they are generally detrimental for all countries.
Keywords: No keywords provided
JEL Codes: E42; F31; F32; F34; F41; P48
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Anticipation of financial sanctions (G18) | Reduction in convenience yield of US dollar assets (F31) |
| Reduction in convenience yield of US dollar assets (F31) | Reduction in holdings of US dollar reserves by foreign countries (F31) |
| Anticipation of financial sanctions (G18) | Reduction in holdings of US dollar reserves by foreign countries (F31) |
| Reduction in holdings of US dollar reserves by foreign countries (F31) | Weakening of the dollar's exchange rate against other currencies (F31) |
| Reduction in premium associated with US dollar assets (G19) | Welfare reductions in the US (I38) |
| Anticipation of financial sanctions (G18) | Reduction in premium associated with US dollar assets (G19) |