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Euro-dollar creation: a mystery story

Author

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  • Fritz Machlup

Abstract

The article looks at the disparity of views among experts regarding the growth of the “Euro-dollar market”. Contradictory explanations have been offered by various authors on the sources and uses of these funds. On one side of the spectrum is the idea that Euro-dollar deposits are the result of multiple creation of credit by banks in a system of only fractional reserves. On the other side is the idea that these deposits owe their existence to owners’ decisions to deposit them with banks in Europe. Some see the source of Euro-dollars in the deficit of the balance of payments of the United States, while others disagree. Finally, most have judged the development of this market to be healthy and beneficial, yet a few have warned of potential catastrophe. The author engages on an extensive conceptual, theoretical and empirical analysis in an attempt to show why some of the current positions held cannot be substantiated by the evid ence available at present.

Suggested Citation

  • Fritz Machlup, 1970. "Euro-dollar creation: a mystery story," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 23(94), pages 219-260.
    • Handle: RePEc:psl:bnlaqr:1979:31
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    File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/11742/11594
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    Cited by:

    1. Dymski Gary & Gavris Maria & Huaccha Gissell, 2023. "Viewing the impact of Brexit on Britain’s financial centre through an historical lens: Can there be a third reinvention of the City of London?," ZFW – Advances in Economic Geography, De Gruyter, vol. 67(2), pages 76-91, August.
    2. Battilossi, Stefano, 2009. "The Eurodollar revolution in financial technology. Deregulation, innovation and structural change in Western banking in the 1960s-70s," IFCS - Working Papers in Economic History.WH wp09-10, Universidad Carlos III de Madrid. Instituto Figuerola.

    More about this item

    Keywords

    Euro; dollar; banks; balance of payments; United States;
    All these keywords.

    JEL classification:

    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

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