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What If the U.S. Dollar's Global Role Changed?

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Abstract

It isn’t surprising that the dollar is always in the news, given the prominence of the United States in the global economy and how often the dollar is used in transactions around the world (as discussed in a 2010 Current Issues article). But the dollar may not retain this dominance forever. In this post, we consider and catalog the implications for the United States of a potential lessening of the dollar’s primacy in international transactions. The circumstances surrounding such a possibility are important for the effects. As long as U.S. fundamentals remain strong, key consequences could be somewhat higher funding costs and somewhat lower seigniorage revenues (the excess returns to the government of creating money), some reduced U.S. spillovers to the rest of the world, and enhanced sensitivity of the domestic economy to foreign economic conditions.

Suggested Citation

  • Mark Choi & Hunter L. Clark & Linda S. Goldberg, 2011. "What If the U.S. Dollar's Global Role Changed?," Liberty Street Economics 20111003, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:86768
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    Cited by:

    1. Menzie Chinn, 2015. "Emerging Market Economies and the Next Reserve Currencies," Open Economies Review, Springer, vol. 26(1), pages 155-174, February.

    More about this item

    Keywords

    Dollar; reserves; currency; international role; rmb; euro;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • F00 - International Economics - - General - - - General

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