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Reframing the euro vs. dollar debate through the perceptions of financial elites in key dollar-holding countries

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  • Miguel Otero-Iglesias
  • Federico Steinberg
Abstract
This paper proposes a theoretically-informed and empirically-grounded cognitive approach to analyse how financial elites from China, the Gulf Cooperation Council states and Brazil interpret the euro vs. dollar debate. At the theoretical level, we argue that the debate should be reframed in order to capture not only the material, but also the ideational footprint of the euro, as well as to better conceptualise change in the International Monetary System (IMS). Our empirical work shows that the euro is perceived by financial elites as a useful diversification tool to avoid over-exposure to dollar weaknesses. However, despite its appeal as a valuable investment alternative, the European currency has a series of structural flaws that prevent it from substituting the dollar as the main international currency. Therefore, in purely material terms, the euro-sceptical literature is correct. However, we also find that the hitherto material inroads of the euro, while limited, have been sufficient to ideationally convince these elites that a multicurrency IMS is possible and might be more stable (and therefore preferable) to current dollar unipolarity. Therefore, the euro-optimist literature is far from wrong when it argues that the creation of the euro represents a challenge to the greenback, for it could be a stepping stone towards the formation of a multipolar IMS.

Suggested Citation

  • Miguel Otero-Iglesias & Federico Steinberg, 2013. "Reframing the euro vs. dollar debate through the perceptions of financial elites in key dollar-holding countries," Review of International Political Economy, Taylor & Francis Journals, vol. 20(1), pages 180-214, February.
    • Handle: RePEc:taf:rripxx:v:20:y:2013:i:1:p:180-214
    DOI: 10.1080/09692290.2012.658736
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    References listed on IDEAS

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    1. Ignazio Angeloni & Agnès Bénassy-Quéré & Benjamin Carton & Christophe Destais & Zsolt Darvas & Jean Pisani-Ferry & André Sapir & Shahin Vallée, . "Global currencies for tomorrow- a European perspective," Blueprints, Bruegel, number 592, June.
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    7. Adam S. Posen & Jean-Pisani Ferry (ed.), 2009. "Euro at Ten: The Next Global Currency?, The," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 4303, April.
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    Cited by:

    1. Radu SIMANDAN, 2020. "A gentle sceptic: Martin Feldstein and the euro," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 11, pages 378-395, December.
    2. Hager, Sandy Brian, 2016. "A Global Bond: Explaining the Safe-Haven Status of US Treasury Securities," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 1-24.
    3. Ponsot, Jean-François, 2016. "The “four I's” of the international monetary system and the international role of the euro," Research in International Business and Finance, Elsevier, vol. 37(C), pages 299-308.
    4. Carla Norrlof, 2014. "Dollar hegemony: A power analysis," Review of International Political Economy, Taylor & Francis Journals, vol. 21(5), pages 1042-1070, October.

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