International dimension of European Monetary Union: implications for the dollar
This paper attempts to review the different elements of the international role of the dollar and, where possible, to provide quantitative information about the current scale of dollar use and how it may be changing, including in response to European monetary union. The paper considers the exchange value of the dollar, the dollar as reserve asset, the dollar as vehicle currency, and the macroeconomic implications for the United States of the fiscal actions likely to be required for the participating EU countries to meet the fiscal convergence criteria specified in the Maastricht Treaty. The paper finds that if Federal Reserve policy continues to contribute to confidence in the long-term value of the dollar and the process of change remains gradual, then European monetary union does not pose serious negative consequences for the international role of the dollar.
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