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The Dollar and Its Discontents

  • Olivier Jeanne

    ()

    (Peterson Institute for International Economics)

Has the US dollar delivered the benefit that the rest of the world is expecting from its holdings of international liquidity? US government debt has been liquid and safe, and it is supplied in sufficient quantity. But it has given a low return to the countries that accumulated the most reserves, especially when those returns are measured in terms of the countries' own consumption. Jeanne argues that countries that accumulate the most reserves should expect a low return in terms of their own consumption and that international monetary reform can do little to change that fact.

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Paper provided by Peterson Institute for International Economics in its series Working Paper Series with number WP12-10.

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Date of creation: May 2012
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Handle: RePEc:iie:wpaper:wp12-10
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  1. Aizenman, Joshua & LEE, JAEWOO, 2005. "International Reserves: Precautionary versus Mercantilist Views, Theory and Evidence," Santa Cruz Department of Economics, Working Paper Series qt2tn4w8x6, Department of Economics, UC Santa Cruz.
  2. 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.
  3. Song, Zheng Michael & Storesletten, Kjetil & Zilibotti, Fabrizio, 2009. "Growing like China," CEPR Discussion Papers 7149, C.E.P.R. Discussion Papers.
  4. Edwards, Sebastian, 1985. "On the interest-rate elasticity of the demand for international reserves: Some evidence from developing countries," Journal of International Money and Finance, Elsevier, vol. 4(2), pages 287-295, June.
  5. N/A, 2011. "Reform of the International Monetary System," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 3(2), pages 185-193, May.
  6. Christopher D. Carroll & Olivier Jeanne, 2009. "A Tractable Model of Precautionary Reserves, Net Foreign Assets, or Sovereign Wealth Funds," NBER Working Papers 15228, National Bureau of Economic Research, Inc.
  7. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2004. "The revived Bretton Woods system," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 9(4), pages 307-313.
  8. Robert N McCauley & Patrick McGuire, 2009. "Dollar appreciation in 2008: safe haven, carry trades, dollar shortage and overhedging," BIS Quarterly Review, Bank for International Settlements, December.
  9. John Williamson, 1994. "Estimating Equilibrium Exchange Rates," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 17, May.
  10. Peter B. Kenen, 2010. "The Substitution Account as a First Step Toward Reform of the International Monetary System," Policy Briefs PB10-6, Peterson Institute for International Economics.
  11. William R. Cline & John Williamson, 2008. "New Estimates of Fundamental Equilibrium Exchange Rates," Policy Briefs PB08-7, Peterson Institute for International Economics.
  12. Dani Rodrik, 2006. "The Social Cost of Foreign Exchange Reserves," NBER Working Papers 11952, National Bureau of Economic Research, Inc.
  13. Joseph Gagnon, 2012. "Global imbalances and foreign asset expansion by developing-economy central banks," BIS Papers chapters, in: Bank for International Settlements (ed.), Are central bank balance sheets in Asia too large?, volume 66, pages 168-185 Bank for International Settlements.
  14. Maurice Obstfeld, 2011. "International Liquidity: The Fiscal Dimension," NBER Working Papers 17379, National Bureau of Economic Research, Inc.
  15. Joshua Aizenman & Yothin Jinjarak & Donghyun Park, 2010. "International reserves and swap lines: substitutes or complements?," NBER Working Papers 15804, National Bureau of Economic Research, Inc.
  16. Edwin M. Truman, 2010. "The G-20 and International Financial Institution Governance," Working Paper Series WP10-13, Peterson Institute for International Economics.
  17. Olivier Jeanne, 2007. "International Reserves in Emerging Market Countries: Too Much of a Good Thing?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 38(1), pages 1-80.
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