Emine Boz, Gita Gopinath, Mikkel Plagborg-Moller, 11 February 2018

In international macroeconomics, it is typically assumed that the exchange rate between two trading partners matters most for trade prices, quantities, and terms of trade. This column presents evidence supporting an alternate view – that a country’s exchange rate relative to the US dollar is most important. This is because invoicing in dollars is common, even when the US is not part of a transaction. The findings have important implications for the conduct of monetary and exchange rate policies.

Emmanuel Farhi, Matteo Maggiori, 20 December 2017

The US has been leveraging itself in recent decades, piling up public and external debt – a trend that could jeopardise the special position the dollar occupies in the international monetary system. This column argues that the US is risking another ‘Triffin’ event, in the form of a confidence crisis and a run on the dollar. The current situation echoes that of the UK in the 1920s and the US in the 1960s. The crises that ended both episodes marked dramatic turning points in the history of the international monetary system.

Cathy Zhang, 09 January 2016

The US dollar has played a central role in the international monetary system, but it currently faces stiff competition from other currencies. This column argues that the benefits of international liquidity provision might be higher than previously thought when one accounts for general equilibrium effects. Quantitatively, the welfare cost of losing international status is not inconsequential for the issuing country. For the US, it amounts to between 0.4% and 1.1% of consumption each year. 

Marc Flandreau, Stefano Ugolini, 23 July 2011

Has the global financial crisis been bad news for the world’s reserve currency? This column argues that it needn’t be, citing the rise of sterling as a global currency after the financial crisis of 1866.

Helmut Reisen, 20 June 2009

If history is any guide, the Chinese renminbi will soon be due to overtake the US dollar, just as the dollar replaced the pound sterling last century. But will the renminbi be ready for reserve currency status? This column discusses the issues at hand and explains why some experts would prefer the IMF’s Special Drawing Rights as the next global reserve currency.

Christian Broda , Piero Ghezzi, Eduardo Levy Yeyati, 22 May 2009

In a new financial landscape in which leverage is limited by worldwide regulation and the gradual digestion of toxic assets will weigh on bank’s balance sheets, the US will face tougher terms to finance its external imbalance. Perfectly at odds with the global imbalance premonitions of the early 2000s, the dollar’s weakness will likely be the best gauge of the turnaround of the global crisis.

Jean Imbs, Isabelle Mejean, 23 March 2009

Estimates of the elasticity of substitution between domestic and foreign varieties are small in macroeconomic data and substantially larger in disaggregated studies. This column reconciles those facts by taking into account the heterogeneity of goods. A better estimate of the aggregate elasticity of substitution is twice the conventional value – suggesting that the US dollar need not depreciate as much as usually thought to reduce the US current account deficit.

Francisco Rodríguez, 23 February 2009

The development theme in the Global Crisis Debate has elicited many important and novel contributions on what the crisis means for the developing world and how developing nations should react. This column provides a synthesis and commentary of the key proposals.

Kristin Forbes, 12 June 2008

To pay for its current account deficit and capital exports, the US needs $2 trillion of additional foreign investment in 2008. Recent research shows that the quality and depth of US capital markets are key to attracting such investment, but the subprime crisis has raised doubts. A judicious regulatory reaction to the subprime crisis will thus be critical to the value of the dollar. If the US imposes a massive increase in poorly thought-out regulation, the dollar could quickly return to its downward spiral.

Michael Bordo, Harold James, 04 April 2008

The euro may surpass the dollar in coming decades to become the leading international currency. This column summarises four major challenges that the euro must survive for that to come true.