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Exploring the Dynamic Nexus between Cross-Border Dollar Claims and Global Economic Growth

Author

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  • Constantinos Alexiou

    (Cranfield School of Management, Cranfield University, Cranfield MK43 0AL, UK)

  • Sofoklis Vogiazas

    (Black Sea Trade and Development Bank, Financial Analysis & Risk Division & Benbow, 54624 Thessaloniki, Greece)

  • Alex Benbow

    (Cranfield School of Management, Cranfield University, Cranfield MK43 0AL, UK)

Abstract

This paper addresses the role of the U.S. dollar in fostering global economic growth during the post-war period. The existing literature lacks a comprehensive understanding of the true implications of the U.S. dollar’s status as a reserve currency and a dearth of studies examining its impact. In this study, we explore the dynamic long-run and short-run relationships between cross-border U.S. dollar claims, global GDP, and global trade while gauging the impact of the Global Financial Crisis (GFC) and the COVID-19 pandemic. In doing so, we use ARDL methodology for a data set that spans the period of 1980 to 2022. The estimation results reveal a robust long-run relationship between U.S. dollar claims, global GDP and global trade and no clear evidence of asymmetric effects. Our findings are of great significance for monetary authorities, emphasising the need for a nuanced understanding of the implications of the U.S. dollar’s conducive role in shaping global economic dynamics and fostering growth.

Suggested Citation

  • Constantinos Alexiou & Sofoklis Vogiazas & Alex Benbow, 2024. "Exploring the Dynamic Nexus between Cross-Border Dollar Claims and Global Economic Growth," Economies, MDPI, vol. 12(3), pages 1-14, March.
    • Handle: RePEc:gam:jecomi:v:12:y:2024:i:3:p:69-:d:1357691
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    References listed on IDEAS

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    1. Broda, Christian & Yeyati, Eduardo Levy, 2006. "Endogenous Deposit Dollarization," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(4), pages 963-988, June.
    2. Eichengreen, Barry, 2012. "Exorbitant Privilege: The Rise and Fall of the Dollar," OUP Catalogue, Oxford University Press, number 9780199642472, Decembrie.
    3. Goldberg, Linda S. & Tille, Cédric, 2008. "Vehicle currency use in international trade," Journal of International Economics, Elsevier, vol. 76(2), pages 177-192, December.
    4. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    5. Barry Eichengreen & Marc Flandreau, 2012. "The Federal Reserve, the Bank of England, and the Rise of the Dollar as an International Currency, 1914–1939," Open Economies Review, Springer, vol. 23(1), pages 57-87, February.
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    1. Apostolos Tranoulidis & Rafaella-Eleni P. Sotiropoulou & Kostas Bithas & Efthimios Tagaris, 2024. "Quantifying the Impact of Coal Transition on GDP Growth through System Dynamics: The Case of the Region of Western Macedonia, Greece," Sustainability, MDPI, vol. 16(16), pages 1-16, August.

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