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The dollar as an official reserve currency under EMU

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Author Info
Michael P. Leahy
Abstract

This paper analyzes official reserve-holding behavior in the EU countries in an attempt to assess the effect EMU might have on official holdings of dollar reserves. A wide range of projections are presented for the effect of EMU on the overall demand for reserves, some based on earlier research results and some on new estimates. In the estimation and simulation of the behavior of EU countries in the last half of the 1980s, the contributions of country-specific factors appear to swamp the systematic components that had been isolated in earlier research. Earlier research results are also used to assess the effect of EMU on the currency composition of reserves. It is argued that official dollar holdings could decline on the order of 35 percent or more from current dollar holdings, although the range of uncertainty is quite large.

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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 474.

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Date of creation: 1994
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Handle: RePEc:fip:fedgif:474

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Related research
Keywords: Monetary unions - European Union countries ; European currency unit ; Dollar; American;

References listed on IDEAS
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  1. Clark, Peter B, 1970. "Optimum International Reserves and the Speed of Adjustment," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 356-76, March-Apr. [Downloadable!] (restricted)
  2. Black, Stanley W., 1985. "International money and international monetary arrangements," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 22, pages 1153-1193 Elsevier. [Downloadable!] (restricted)
  3. Lizondo, JoseSaul & Mathieson, Donald J., 1987. "The stability of the demand for international reserves," Journal of International Money and Finance, Elsevier, vol. 6(3), pages 251-282, September. [Downloadable!] (restricted)
  4. Ben-Bassat, Avraham, 1980. "The optimal composition of foreign exchange reserves," Journal of International Economics, Elsevier, vol. 10(2), pages 285-295, May. [Downloadable!] (restricted)
  5. Olivera, Julio H G, 1969. "A Note on the Optimal Rate of Growth of International Reserves," Journal of Political Economy, University of Chicago Press, vol. 77(2), pages 245-48, March/Apr. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Kenen, Peter B., 1998. "EMU and Transatlantic Economic Relations," Discussion Paper Series 26164, Hamburg Institute of International Economics. [Downloadable!]
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This page was last updated on 2009-12-31.

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