Takeshi Kimura, Teppei Nagano, 30 May 2017

While non-US entities pay dollar funding premiums in the FX swap market, the US earns profits on FX-hedged investments in non-US sovereign securities. This column argues that this new form of the ‘exorbitant privilege’ presents a modern version of the ‘Triffin dilemma’. If the distributional effect of US privilege becomes large enough to induce non-US entities to take excessive risk, the stability of the global financial system will come under threat. 

Maurizio Michael Habib, 29 March 2010

Does the dollar enjoy an “exorbitant privilege”, in which US residents pay relatively low interest on their foreign liabilities while receiving relatively high returns on their foreign assets? This column argues that the answer is “yes”, while the excess returns are not explained by different risks between the US and elsewhere.

Events

CEPR Policy Research