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Compositional Analysis of Foreign Currency Reserves in the 1999-2007 Period : The Euro vs. The Dollar as Leading Reserve Currency

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  • Aristovnik, Aleksander
  • Čeč, Tanja

Abstract

Using a critical analysis of the acquired data, this article mainly aims to present the currency composition of the foreign currency reserves of central banks in selected countries in the 1999-2007 period and, on this basis, to establish whether the euro stands any real chances of dethroning the US dollar as the global currency. Among other things, the empirical results, for the most part overlapping with the theoretical and empirical expectations, confirm the hypothesis that in the near future the euro may be regarded as a global reserve currency on a par with the US dollar or it may even become the leading reserve currency. Finally, the empirical analysis also shows that the proportion of the euro in foreign currency reserves differs by the groups of countries concerned; however, in the period under scrutiny it was mainly increasing.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 14350.

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Date of creation: 26 Mar 2009
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Publication status: Published in Romanian Journal of Economic Forecasting 1.13(2010): pp. 165-181
Handle: RePEc:pra:mprapa:14350

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Keywords: international monetary system; international currency; foreign currency reserves; dollar; euro;

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  1. Johannes Onno de Beaufort Wijnholds & Lars Søndergaard, 2007. "Reserve accumulation - objective or by-product?," Occasional Paper Series 73, European Central Bank.
  2. Chinn, Menzie David & Frankel, Jeffrey A., 2006. "Will the Euro Eventually Surpass the Dollar As Leading International Reserve Currency?," Santa Cruz Department of Economics, Working Paper Series qt4hz4n9pb, Department of Economics, UC Santa Cruz.
  3. Gourinchas, Pierre-Olivier & Rey, Hélène, 2005. "From World Banker to World Venture Capitalist: US External Adjustment and the Exorbitant Privilege," CEPREMAP Working Papers (Docweb) 0606, CEPREMAP.
  4. Papaioannou, Elias & Portes, Richard & Siourounis, Gregorios, 2006. "Optimal currency shares in international reserves: The impact of the euro and the prospects for the dollar," Journal of the Japanese and International Economies, Elsevier, vol. 20(4), pages 508-547, December.
  5. Srichander Ramaswamy, 1999. "Reserve currency allocation: an alternative methodology," BIS Working Papers 72, Bank for International Settlements.
  6. Gabriele Galati & Philip D. Wooldridge, 2006. "The euro as a reserve currency: a challenge to the pre-eminence of the US dollar?," BIS Working Papers 218, Bank for International Settlements.
  7. Ewe-Ghee Lim, 2006. "The Euro's Challenge to the Dollar," IMF Working Papers 06/153, International Monetary Fund.
  8. Masson, Paul R., 2008. "The euro and developing country finance: A survey," The North American Journal of Economics and Finance, Elsevier, vol. 19(2), pages 175-191, August.
  9. Wyplosz, Charles (ed.), 2001. "The Impact of EMU on Europe and the Developing Countries," OUP Catalogue, Oxford University Press, number 9780199245314, September.
  10. Philip D Wooldridge, 2006. "The changing composition of official reserves," BIS Quarterly Review, Bank for International Settlements, September.
  11. Robert Mundell, 1998. "What the euro means for the dollar and the international Monetary system," Atlantic Economic Journal, International Atlantic Economic Society, vol. 26(3), pages 227-237, September.
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Cited by:
  1. Min Zhang & Adam W. Kolkiewicz & Tony S. Wirjanto & Xindan Li, 2013. "The Impacts of Financial Crisis on Sovereign Credit Risk Analysis in Asia and Europe," Working Paper Series 62_13, The Rimini Centre for Economic Analysis.

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