Stability or upheaval? The currency composition of international reserves in the long run

Barry Eichengreen, Livia Chitu and Arnaud Mehl

No 201, Globalization Institute Working Papers from Federal Reserve Bank of Dallas

Abstract: We analyze how the role of different national currencies as international reserves was affected by the shift from fixed to flexible exchange rates. We extend data on the currency composition of foreign reserves backward and forward to investigate whether there was a shift in the determinants of the currency composition of international reserves around the breakdown of Bretton Woods. We find that inertia and policy-credibility effects in international reserve currency choice have become stronger post-Bretton Woods, while network effects appear to have weakened. We show that negative policy interventions designed to discourage international use of a currency have been more effective than positive interventions to encourage its use. These findings speak to the prospects of currencies like the euro and the renminbi seeking to acquire international reserve status and others like the U.S. dollar seeking to preserve it.

JEL-codes: F30 N20 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2014-10-01
New Economics Papers: this item is included in nep-mon and nep-opm
Note: Published as: Eichengreen, Barry, Livia Chiţu and Arnaud Mehl (2016), "Stability or Upheaval? The Currency Composition of International Reserves in the Long Run," IMF Economic Review 64 (2): 354-380.
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Citations: View citations in EconPapers (4)

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Working Paper: Stability or upheaval? The currency composition of international reserves in the long run (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:feddgw:201

DOI: 10.24149/gwp201

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