Meanwhile, back at the ranch ... Observers of international finance have long puzzled over the durability of the dollars predominance in official foreign exchange reserves. Heller and Knight (1978) found that on average, the countries in our sample tend to hold 66% of their foreign-exchange reserves in dollars. Some 36 years later, the IMF reports that 61% of allocated aggregate reserves are held in dollars. This is despite the dollars 18% decline against major currencies and its 62% and 52% depreciations against the Deutsche mark/euro and the yen, respectively. Moreover, the US economys share of global GDP has shrunk by 6% since 1978. If one takes the size of the US economy to explain the dollars share, then one might infer that this share would decline only slowly unless and until another economy surpasses the US economy in size. https://bis.org/publ/qtrpdf/r_qt1412e.htm
Posted on: Sat, 03 Jan 2015 23:20:40 +0000
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