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The Dollar and its Discontents

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  • Olivier Jeanne

Abstract

Has the US dollar delivered the benefits 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. I argue in this paper that the countries that accumulate the most reserves should expect a low return in terms of their own consumption, and that there is little that international monetary reform can do to change that fact.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18143.

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Date of creation: Jun 2012
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Publication status: published as Jeanne, Olivier, 2012. "The dollar and its discontents," Journal of International Money and Finance, Elsevier, vol. 31(8), pages 1976-1989.
Handle: RePEc:nbr:nberwo:18143

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  1. Aizenman, Joshua & LEE, JAEWOO, 2005. "International Reserves: Precautionary versus Mercantilist Views, Theory and Evidence," Santa Cruz Center for International Economics, Working Paper Series, Center for International Economics, UC Santa Cruz qt44g3n2j8, Center for International Economics, UC Santa Cruz.
  2. Pierre-Olivier Gourinchas & Hélène Rey, 2007. "From World Banker to World Venture Capitalist: U.S. External Adjustment and the Exorbitant Privilege," NBER Chapters, in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 11-66 National Bureau of Economic Research, Inc.
  3. Christopher D. Carroll & Olivier Jeanne, 2009. "A Tractable Model of Precautionary Reserves, Net Foreign Assets, or Sovereign Wealth Funds," Working Paper Series, Peterson Institute for International Economics WP09-10, Peterson Institute for International Economics.
  4. Robert N McCauley & Patrick McGuire, 2009. "Dollar appreciation in 2008: safe haven, carry trades, dollar shortage and overhedging," BIS Quarterly Review, Bank for International Settlements, Bank for International Settlements, December.
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  6. 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.
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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, Elsevier, vol. 31(8), pages 1971-1975.

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