DP13410 The Rise of the Dollar and Fall of the Euro as International Currencies

Author(s): Matteo Maggiori, Brent Neiman, Jesse Schreger
Publication Date: December 2018
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Programme Areas: Financial Economics, International Trade and Regional Economics, International Macroeconomics and Finance, Monetary Economics and Fluctuations
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13410

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.