Can American Dollar Survive the Onslaught of Euro? An Empirical Investigation
U21Global Working Paper No. 001/2006
24 Pages Posted: 16 May 2010
Date Written: February 1, 2006
Abstract
The American dollar has been the anchor currency of the international monetary system and no other currencies have so far been able to rival the greenback in its standing. Does the birth of Euro pose a challenge to the hegemony of the dollar as the predominant currency? This paper seeks to answer the question by first reviewing the process of internationalization of the euro and then examining the movements in dollar-euro exchange rates by means of cointegration techniques. By identifying the key determinants of the exchange rate and analysing the recent developments in the euro area and the United States, the paper discusses some important policy implications for ECB and the success of Euro in general.
Keywords: International monetary systems, Exchange rate, Monetary economics
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