Us Sanctions Reinforce the Dollar's Dominance

10 Pages Posted: 18 Apr 2022 Last revised: 26 Apr 2023

See all articles by Michael P. Dooley

Michael P. Dooley

University of California at Santa Cruz; National Bureau of Economic Research (NBER)

David Folkerts-Landau

Deutsche Bank, London; National Bureau of Economic Research (NBER)

Peter Garber

Brown University

Date Written: April 2022

Abstract

Recent sanctions on the use of Russia’s international reserve assets seem likely to reduce the appeal of US dollar reserves as a “shock absorber” for international payments. But international reserves are also a means to reassure foreign investors that problematic countries will not confiscate their investments. The “collateral” motive for holding dollar reserves has been enhanced by the demonstration that the United States is willing and able to sanction misbehavior. Geopolitically risky countries now more than ever need to reassure foreign investors that their investments are safe from expropriation. We conclude that recent events will strengthen the role of the dollar as the key international reserve currency.

Suggested Citation

Dooley, Michael P. and Folkerts-Landau, David and Garber, Peter, Us Sanctions Reinforce the Dollar's Dominance (April 2022). NBER Working Paper No. w29943, Available at SSRN: https://ssrn.com/abstract=4086233

Michael P. Dooley (Contact Author)

University of California at Santa Cruz ( email )

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National Bureau of Economic Research (NBER)

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David Folkerts-Landau

Deutsche Bank, London ( email )

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National Bureau of Economic Research (NBER)

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Peter Garber

Brown University

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