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Does The Euro Have A Chance to Challenge The Dollar

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  • Idil Goksel

    (Department of Economics, Izmir University of Economics)

Abstract

The dollar has been the dominant currency since the World War II. Will the euro ever be able to challenge the dollar? In order to understand the chance of the euro against the dollar some comparisons are made between them. Starting with the main economic indicators to their roles in the international trade, their power and potential in many economical aspects are tried to be figured out and compared. Furthermore, their elasticities, their roles in the international financial markets, current account and trade balance of the the two parts are discussed. An empirical study on international bonds and notes is made by using the attraction model. All of the analyses made in this research show us the potential of the euro to become an international currency. Although the dollar has still some advantages over the euro, a bipolar currency regime dominated by Europe and the United States may replace the dollar-centered system that has continued for most of this century.

Suggested Citation

  • Idil Goksel, 2004. "Does The Euro Have A Chance to Challenge The Dollar," Working Papers 0401, Izmir University of Economics.
  • Handle: RePEc:izm:wpaper:0401
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    References listed on IDEAS

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    1. Hartmann,Philipp, 2007. "Currency Competition and Foreign Exchange Markets," Cambridge Books, Cambridge University Press, number 9780521046930.
    2. McKinnon, Ronald, 2002. "The euro versus the dollar: resolving a historical puzzle," Journal of Policy Modeling, Elsevier, vol. 24(4), pages 355-359, July.
    3. Hans-Werner Sinn & Frank Westermann, 2000. "Two Mezzogiornos," CESifo Working Paper Series 378, CESifo Group Munich.
    4. Danthine, Jean-Pierre & Giavazzi, Francesco & von Thadden, Ernst-Ludwig, 2000. "European Financial Markets After EMU: A First Assessment," CEPR Discussion Papers 2413, C.E.P.R. Discussion Papers.
    5. George S. Tavlas, 1997. "The International Use of the US Dollar: An Optimum Currency Area Perspective," The World Economy, Wiley Blackwell, vol. 20(6), pages 709-747, September.
    6. Bergsten, C. Fred, 2002. "The euro versus the dollar: will there be a struggle for dominance?," Journal of Policy Modeling, Elsevier, vol. 24(4), pages 307-314, July.
    7. Grassman, Sven, 1973. "A fundamental symmetry in international payment patterns," Journal of International Economics, Elsevier, vol. 3(2), pages 105-116, May.
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