We study how U.S. dollar fluctuations transmit through domestic supply chains in emerging markets. Large firms borrow in foreign currency and extend trade credit to domestic partners, exposing the supply chain to exchange rate risk. We develop a model where financially constrained suppliers pass...

This paper documents a new dollar channel that transmits monetary policy across borders. Exploiting unique features of the syndicated loan market for identification, we show that changes in the euro-dollar exchange rate around ECB monetary policy announcements that are orthogonal to simultaneous...

The paper discusses whether US dollar based financial sanctions will undermine the dollar's dominant international role. Despite long-standing attempts to reduce the role of the dollar, these have had limited success so far. I discuss why this is the case and why alternatives to the dollar are...

This paper documents a new dollar channel that transmits monetary policy across borders. Exploiting unique features of the syndicated loan market for identification, we show that changes in the euro-dollar exchange rate around ECB monetary policy announcements that are orthogonal to simultaneous...

The share of U.S. dollar assets in the official foreign exchange reserve portfolios of central banks is sometimes taken as an indicator of dollar status. We show that the observed decline in the aggregate share of U.S. dollar assets does not stem from a systematic shift in currency preferences...

The inquiry into the global significance of the euro, which is the second most important currency in the international financial system after the US dollar (hereinafter, the dollar), should be treated as a priority in efforts to strengthen the EU’s strategic autonomy. The main obstacles...

The Meese-Rogoff puzzle suggests that exchange rate models rarely outperform a random walk in out-of-sample forecasting. This paper re-examines that puzzle in the context of the German hyperinflation, an environment in which monetary forces dominate economic behavior. Using simple bivariate...

This study examines the determinants of gold returns over the period 2000-2025, a period marked by recurrent financial crises, geopolitical tensions, and major shifts in global monetary conditions. As gold represents both a strategic commodity and a key reserve asset, understanding the channels...

The US dollar (USD) has long been the dominant international currency. The euro (EUR), UK pound (GBP), Japanese yen (JPY), and other advanced economy (AE) currencies have played complementary roles to the USD as international currencies, while emerging market and developing economy (EMDE)...

We study the determinants of US dollar demand across market participants and traded instruments using survey-based exchange rate and macroeconomic expectations. Leveraging granular foreign exchange trading data, we show that forward-looking expectations accurately predict both currency returns...

Our econometric (cointegration) analysis of the Swiss franc US dollar exchange rates over the period 1974 - 2025 provides strong evidence for a negative bias of the forward rate as predictor of the spot rate for the years up to 2007, which disappears with data from 2008 onwards. This implies...

We study the determinants of US dollar demand across market participants and traded instruments using survey-based exchange rate and macroeconomic expectations. Leveraging granular FX trading data and forward looking expectations, we present three results. First, currency investors increase...

We present a micro-founded monetary model of the world economy to study international currency competition. Our model features "unipolar" equilibria, with a single dominant international currency, and "multipolar" equilibria, in which multiple currencies circulate internationally. Long-run...

The recent period has seen an upsurge in predictions that the dollar's international dominance will at some point be challenged by a rival currency, notably the euro. This paper counters these predictions. It argues that the overestimation of the euro's ability to challenge dollar dominance is...

Written for a PIIE conference on the 50th anniversary of floating exchange rates, this paper deals with possible alternatives to a unipolar dollar-based system. It considers (1) measures of international currency use; (2) potential challengers to the dollar; (3) network externalities; and (4) the...

This paper provides evidence that the U.S. dollar affects countries' exports through the financial channel of the exchange rate (Bruno and Shin (2015)). Using global data on trade between countries whose currency is not the U.S. dollar, it documents a positive relationship between the dollar and...

Modern monetary theory argues that all governments that issue their own currency have the same policy space. The present paper argues that this position is wrong. For it to be valid, abstraction must be made from the gravitational force of the US dollar that stems from its backing mass of...

Amid the growing debate over how cryptocurrencies are reshaping global finance, this study explores the nexus between Bitcoin, Brent Crude Oil, Gold and the U.S. Dollar Index. We used a time-varying vector autoregressive (tvVAR) model to examine the connection among these four assets during the...

Available studies suggest that fiscal policy measures aimed at increasing disposable income growth may have an impact on inflation. As inflation in Montenegro in 2022 was higher compared to the euro area, several studies were conducted to estimate the impact of external and domestic inflation...

Geopolitical frictions and high levels of uncertainty in US policy are driving countries to reduce dependence on the US dollar and implement new policies to promote their own currencies for settling cross-border trade. This Weekly Report analyzes the reactions of firms to such measures, focusing...

This paper examines the persistence and challenges of dollar supremacy in the international monetary system, from Bretton Woods to digital stablecoins. It highlights structural supports for dollar dominance, such as deep U.S. financial markets and commodity pricing, but also explores...

This paper examines the persistence and challenges of dollar supremacy in the international monetary system, from Bretton Woods to digital stablecoins. It highlights structural supports for dollar dominance, such as deep U.S. financial markets and commodity pricing, but also explores...

I examine how governments have managed their holdings of gold and dollar reserves in recent decades, a period when gold's share of aggregate international reserves rose and the dollar's share fell. Using data on central banks’ reserve currency composition and official sector purchases of U.S....

US dollar appreciations can inflict sizable negative cross-border spillovers. We investigate such spillovers from flight-to-safety shocks and the accompanying "global dollar cycle". Results show that negative real sector spillovers from US dollar appreciations fall disproportionately on emerging...