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The Dollar and Its Discontents

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  • Olivier Jeanne

    ()
    (Peterson Institute for International Economics)

Abstract

Has the US dollar delivered the benefit that the rest of the world is expecting from its holdings of international liquidity? US government debt has been liquid and safe, and it is supplied in sufficient quantity. But it has given a low return to the countries that accumulated the most reserves, especially when those returns are measured in terms of the countries' own consumption. Jeanne argues that countries that accumulate the most reserves should expect a low return in terms of their own consumption and that international monetary reform can do little to change that fact.

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Paper provided by Peterson Institute for International Economics in its series Working Paper Series with number WP12-10.

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Date of creation: May 2012
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Handle: RePEc:iie:wpaper:wp12-10

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Keywords: International monetary system; Dollar; Foreign exchange reserves; Triffin dilemma;

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  1. Gourinchas, Pierre-Olivier & Rey, Hélène, 2005. "From World Banker to World Venture Capitalist: US External Adjustment and The Exorbitant Privilege," CEPR Discussion Papers 5220, C.E.P.R. Discussion Papers.
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  3. Peter B. Kenen, 2010. "The Substitution Account as a First Step Toward Reform of the International Monetary System," Policy Briefs PB10-6, Peterson Institute for International Economics.
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  6. Carroll, Christopher D. & Jeanne, Olivier, 2009. "A tractable model of precautionary reserves, net foreign assets, or sovereign wealth funds," CFS Working Paper Series 2009/15, Center for Financial Studies (CFS).
  7. Aizenman, Joshua & Jinjarak, Yothin & Park, Donghyun, 2011. "International reserves and swap lines: Substitutes or complements?," International Review of Economics & Finance, Elsevier, vol. 20(1), pages 5-18, January.
  8. Aizenman, Joshua & LEE, JAEWOO, 2005. "International Reserves: Precautionary versus Mercantilist Views, Theory and Evidence," Santa Cruz Department of Economics, Working Paper Series qt2tn4w8x6, Department of Economics, UC Santa Cruz.
  9. Joseph Gagnon, 2012. "Global imbalances and foreign asset expansion by developing-economy central banks," BIS Papers chapters, in: Bank for International Settlements (ed.), Are central bank balance sheets in Asia too large?, volume 66, pages 168-185 Bank for International Settlements.
  10. Kjetil Storesletten & Fabrizio Zilibotti & Zheng Song, 2009. "Growing like China," 2009 Meeting Papers 912, Society for Economic Dynamics.
  11. N/A, 2011. "Reform of the International Monetary System," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 3(2), pages 185-193, May.
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  13. Keynote Speech by Maurice Obstfeld, 2011. "International Liquidity: The Fiscal Dimension," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 29, pages 33-48, November.
  14. William R. Cline & John Williamson, 2008. "New Estimates of Fundamental Equilibrium Exchange Rates," Policy Briefs PB08-7, Peterson Institute for International Economics.
  15. Olivier Jeanne, 2007. "International Reserves in Emerging Market Countries: Too Much of a Good Thing?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 38(1), pages 1-80.
  16. John Williamson, 1994. "Estimating Equilibrium Exchange Rates," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 17.
  17. Edwin M. Truman, 2010. "The G-20 and International Financial Institution Governance," Working Paper Series WP10-13, Peterson Institute for International Economics.
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Cited by:
  1. Aizenman, Joshua & Dekle, Robert & Lothian, James R., 2012. "Overview of the special issue on “Policy Implications of and Lessons from the Global Financial Crisis”," Journal of International Money and Finance, Elsevier, vol. 31(8), pages 1971-1975.

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