Since the start of the European Monetary Union there has been an intense debate on whether the euro would challenge the U.S. dollar’s dominant role first as an international currency, and then as an official reserve currency. Five years after the euro was born, it is considered without doubt an international currency since it has been reported that ¨in December (2006) the currency came of age by overtaking the U.S. dollar in terms of the value of notes in circulation¨1. Moreover, since the euro has successfully developed a solid financial market, it is consequently eroding some of the advantages that historically supported the hegemony of the U.S. dollar as a reserve currency. There are two intertwined reasons that explain why the U.S. dollar remains the leading international currency. To begin with, there is (1) inertia in the use of the U.S. dollar due to years of currency pre-eminence which (2) has helped the U.S. dollar to have an edge over the euro in terms of the size, credit quality and liquidity of the dollar financial markets over the euro market. Despite all this, the euro has been enjoying a successful moment in the last years since it is appreciating against the U.S. dollar especially since mid-2002
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
7182.