DETERMINANTS OF INTERNATIONAL RESERVE CURRENCY-AN EMPIRICAL APPROACH

By

B. B. Dave,Chief Postmaster General, Assam Circle, Guwahati-781001PhD student from Sardar Patel University, Anand, Gujarat.

Mobile No. +91 9401855337E-mail Id: bbdave100@hotmail.com

And

Professor Yogesh C. Joshi, Guide for PhD

Abstract

This research paper looks at the factors that are responsible for a currency to act as the key currency in international reserves. Attention of researchers has been engaged by the question of adoption of a currency as an international key currency. A currency to be a major currency in the international arena is decided by the use to which it is put. Generally speaking, an international currency plays three major roles i.e. store of value, medium of exchange and unit of account. All these functions mean differently for the official players and private/individual participants. The data relating to the official reserves suggest that while official reserves are gradually being diversified, the currency composition has not changed as much as instrument composition. Reserve managers have steadily reallocated their portfolios towards higher yielding and riskier instruments. However, this reallocation has not changed the relative position of US dollar in reserves. The Euro’s share is higher today than it was immediately prior to the EMU but it is still well below the US dollar’s share and below even the EU’s legacy currencies.

This paper analyses the factors which affect the foreign exchange reserve of a country like trade and output, exchange rate volatility, size of a country issuing the currency, network externalities of a currency and the inertia effects of the incumbent currency.

Data and Methodology: -While data on total foreign currency are readily available from national sources as well as from the IMF, classification of these reserves by currency and instrument is harder to get. National sources provide the most detailed data but the country coverage is relatively limited. Only about 20 central banks publish details of currency composition of the reserves. As many as about 65 central banks publish details of instrument composition, but they exclude China which itself accounts for 20% of world reserves. The other major source is the Surveys. Surveys provide aggregate data, in which no individual central bank is identified, and so the reserve managers are willing to share the information. One such survey is the Currency Composition of Official Foreign Exchange Reserves (COFER). They report classification in five major currencies—US dollars, euros, yen, pound sterling and Swiss franc—plus a residual for all other currencies. The COFER data capture <70% of the foreign currency reserves as holdings of some of the emerging economies are missing. Also, in their data there is a category called ‘unallocated reserves’ for which there is no classification currency-wise.

The IMF also conducts a survey which captures the geographic distribution of securities held as reserve assets, as a part of the Coordinated Portfolio Investment Survey(CPIS). These data capture monetary authorities’ and international organizations’ combined holdings of equity and debt securities. However, the particulars of currency in which they are denominated are missing.

Counterparty’s data on outstanding liabilities from various monetary authorities, are a close proxy for asset reserves. They usually cover all the countries but the definition of liabilities to official institutions is different from the conventional definition of reserves. One such source is United States Treasury International Capital (TIC)

1

system. It maintains separate data for cross-border holdings of US securities by official institutions from those held by private investors. On the whole they likely underestimate US dollar securities held as reserve assets.

Finally, the Locational International Banking (LIB) statistics compiled by BIS capture reserves placed with commercial banks in the form of deposits or loans including reverse repo. Banks report their cross-border and foreign currency liabilities to “official monetary authorities” in all the five major currencies and a residual for all other currencies. Banks in all important financial centers contribute to the LIB statistics and hence the coverage of these data is quite large. However, the data held by BIS do not include the reserves held by treasuries and government agencies. They also exclude the deposits placed with BIS itself. The BIS accepts deposits from monetary authorities and invests them in deposits, reverse repos and securities. BIS itself is an official monetary authority, which accepts deposits and reinvests in bank deposits and reverse repo. Another limitation of the LIB data is that they include cross-border deposits denominated in domestic currencies. Of course the primary limitation of the BIS LIB data is that they capture only the deposits. Deposits account for a declining proportion of total reserves.

A limitation common to both the IMF COFER and the BIS LIB data is that they refer to gross reserve assets and so they give an incomplete picture of ultimate risk exposures. The net reserves excluding the liabilities are different from gross reserves. In addition, derivative positions, which are recorded separately from the transactions to which they are linked like hedges, have important impact on exposures. The management of the currency risk associated with an international portfolio has come to be seen by institutional investors as a way to generate higher returns. Hence the management of currency risks by banks becomes a conspicuous attempt on the part of the banks and in the process the banks increase exposure of reserves to currencies other than US dollar. Despite above limitations of the data this paper uses the data of COFER for the analysis. I have used various statistical methods, including correlation, regression and descriptive statistical analysis for the purpose of this paper.

Key words- Determinants of currency holdings, Euro vs Dollar, Foreign Exchange Reserves, Reserve Currency Holdings,

I. Introduction to Hard and Soft Currencies and their brief history

A hard currency, safe-haven currency or vehicle currency is the one that is expected to serve as a reliable and stable store of value and unit of exchange. The factors that contribute to a currency's hard status might include the long-term stability of its purchasing power, the associated country's political and fiscal conditions and its outlook, and the policy posture of the issuing central bank s concerned .

Conversely, a soft currency indicates a currency which is expected to fluctuate erratically or depreciate against other currencies. Such softness is typically and generally the result of the political conditions and the associated country’s fiscal instability. Historically, various currencies have behaved as hard currencies like dollar, pound, sterling, guild, Japanese Yen etc. at various times. At various times many currencies have behaved as weak currencies depending on their purchasing power and fluctuations with respect to other currencies. One of the major indicators of the hard currency is the foreign exchange reserves held by various countries in various proportions of different currencies. Many countries do not reveal the official reserves of various currencies held by them. The official currency composition of the foreign exchange reserves as available from COFER data are plotted as below1,2,3.

1 Review of the International Role of Euro Frankfurt am Main: European Central Bank, December 2005, ISSN 1725-2210; ISSN 1725-6593 (online].2 For 1995–99, 2006–12: "Currency Composition of Official Foreign Exchange Reserves (COFER)" (PDF). Washington, DC: International Monetary Fund. January 3, 2013.3 For 1999–2005: International Relations Committee Task Force on Accumulation of Foreign Reserves (February 2006), The Accumulation of Foreign Reserves (PDF), Occasional Paper Series, Nr. 43, Frankfurt am Main: European Central Bank, ISSN 1607-1484; ISSN 1725-6534 (online).

2

Figure-1

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

Currency Reserve Change over the Years

US dollar Euro German Franc French FrancPound Sterling Japanese Yen Canadian Dollar Australian DollarSwiss Franc Other

In the last one year the currency composition of all the countries of the world as per COFER data (Quarter-wise) is as under, which includes unallocated reserves also. Allocated Reserves refer to data on foreign exchange reserves reported under COFER. Unallocated Reserves is the difference between the total foreign exchange reserves in the IFS (world table on Foreign Exchange) and the total allocated reserves in COFER. Unallocated Reserves includes foreign exchange holdings of those countries/territories that currently report to IFS but do not report to COFER.

Table-1

Currency Composition of Foreign Exchange Reserves

3

Figure-2

Figure -3

The US dollar (USD) has been considered as a strong / hard currency for much of its history. Despite the 1971 shock, also sometimes called Nixon shock, and the United States’ growing fiscal and trade deficits, most of the world’s monetary systems have been tied to the USD due to the Bretton Woods System and dollarization. Countries have thus been compelled to purchase dollars for their foreign exchange reserves, denominate their assets and commodities in dollars for foreign trade and even use dollar domestically, thus buoying the currency’s value.

4

However, after the late 2000s financial crisis witnessed the Federal Reserve’s easing out quantitatively and the downgrading of the US debts by credit rating agencies, countries started diversifying their foreign reserve assets away from dollar, commodities trading in currencies other than the USD like Iranian Oil bourse, resumed appreciation of Yuan by the Peoples’ Bank of China and the IMF’s proposal of the SDR as an alternative to the dollar in some applications. These measures and others eroded the confidence in the US dollar to some extent.

The Euro has also been considered as a hard currency for much of its short history, however, the European sovereign debt crisis has eroded that confidence with many predicting the currency’s demise.

The Swiss Franc (CHF) has long been considered as a hard currency, and in fact was the last paper currency in the world to terminate its convertibility to gold. In the summer of 2011, the European sovereign debt crisis led to rapid outflows of the euro and into the franc by those seeking the hard currency, causing the latter to appreciate rapidly. On September 6, 2011, the Swiss National Bank announced its decision to buy unlimited number of “euros” to fix an exchange rate of 1.00 EUR = 1.2 CHF, to protect its trade. This action, at least temporarily, eliminated the franc’s hard currency status over the euro.

In most of the financial crises of the world, countries with strong currencies are at risk of large inflows of capital from foreign countries causing appreciation of that currency. The impact of such appreciation is historically unprecedented and spreads very widely in a contagious manner due to globalization and free trade. Thus the world’s Central Banks are interlocked into a spiral of “competitive devaluation” in which all the value of all the fiat money systems is being eroded4. This process is reflected in the escalating price of gold because the investors turn back to gold and other precious metals as a store of value and therefore, try to hedge against the rising inflation, which in turn, causes the price to increase rapidly, sometimes for several consecutive years and recently, at many times at the rates more than the rate of inflation. Moreover, the investors generally prefer hard currencies to soft currencies at times of increased inflation or political or military uncertainties/risks. For example, during the Cold War, the ‘ruble’ in the USSR was not a hard currency. The country was imposing artificially high rates on Western tourists as compared to its own citizens, who could exchange ruble for hard currencies to a very limited extent only. After the fall of Russia in 1991 December, the ruble depreciated rapidly (from 200 rubles per USD in June 1992 to 400 rubles per USD in November 1992).

In addition, there are mixed currencies. In some cases a central bank may, in order to increase the confidence in the local currency, peg their currency to a hard currency as in case of Hong Kong Dollar or the Bosnia and Herzegovina’s convertible Mark. This may sometimes lead to problems as some economic conditions force the government to break the currency peg as occurred in Argentine crisis (1999-2002). In other cases, an economy may choose to abandon local currency as legal tender in a process called ‘dollarization’. For example, Zimbabwe, El Salvador and Ecuador adopted US dollar as their country’s currency.

From the trends of currency reserves which are indirectly linked with the international trade, it can be seen that Euro as hard currency has evolved over the years and the share of dollar has gone down. In order to understand the phenomenon, it is essential to understand the brief history of emergence of European Monetary Union.

CHAPTER-II4 Paul, Ari David (20 May 2010). "Competitive Devaluation Draws Closer". Seeking Alpha. Retrieved 17 October 2011.

5

RESERVE CURRENCY DETERMINANTSThe literature which is available on the factors which determine a currency to be used as the reserve

currency is although fairly well established, but it often lacks in quantification in absence of reliable data. The three key factors identified are as follows:-

1. There are a number of determining factors which are very significant in deciding about the eligibility of a currency as the vehicle currency. The most important, however, is the size of the country in terms of GDP, exchange-rate volatility etc.

2. Network externalities or economies of scale and scope are important. Each country uses the currency in its trade whatever currency is used by others. Therefore, international currency use is non-linear in terms of determinants. 3. In chronological sense the switch happens slowly. Whatever currency was used in the past the same currency will continue to be used in future for quite some time. This phenomenon is called inertia.

1. EXCHANGE RATE VOLATILITY AND GDPFor the purpose of this research, as discussed above, we have data on holding of foreign exchange reserves

for the years from 2005 to 2013. Out of the various indicators of international use of currency, the data that is available on the timeliest basis is the currency of denomination in cross-border financial transactions in respect of many countries but not all as many countries do not reveal the same and partly because the private sector data in many cases are not available. The Euro on introduction as a currency, soon after its introduction, came into use widely mostly to denominate the bonds. Within the European countries, there was a tremendous rise in the issue of corporate bonds denominated in Euros. It was also witnessed by rapid integration of the financial markets, government bonds markets, equity markets and banking in various countries of the European Union. Moreover, when Euro arrived, its share approximately equaled the sum of the shares of the Mark, French franc and Guilder. But the year before the formation of the EMU, it was less than one would get by adding the share of European Currency Units. This was as per the expectations because before 1999, all the twelve Central Banks held foreign exchange reserves including those of each other’s’ currencies. This disappeared on January 1, 1999. On the other hand, the Dollar’s share in various Central Banks’ FOREX reserves rose from 59% in 2005 to 61.2% in 2013 and the share of Euro increased from 19.6% in 2005 to 24.4% in 2013 as FOREX reserves. As per the triennial survey report of the year 2013 published by the Bank of International Settlements, the US Dollar still remained the major vehicle currency in all the financial and commodity markets. Not only this, the dollar-denominated trade constituted 87% of all trade in April, 2013. Euro was the second most traded currency at 33% in April, 2013 down from 39% in April, 2010. Also Chinese renminbi entered the list of the top 10 most traded currencies.

1. Exchange Rate VolatilityEven if a key currency were used only as a unit of account, a necessary qualification would be that its value

does not fluctuate erratically. As it is, a key currency is also used as a form in which to hold assets (firms hold working balances of the currencies in which they invoice, investors hold bonds issued internationally, and central banks hold currency reserves). Here the currency to be used as a unit of account, it must instill confidence in the holders that the value of the currency will be stable over a period of time, and particularly that it will not be inflated away in the future. This is very critical. In 1970s the monetary authorities in Japan, Germany and Switzerland, established a better track record of low inflation than did the United States, which helped their bid for international currency status. But in 1980s the mean and variance of the inflation rate in the US were both higher than the above three hard currency countries although lower than UK, France, Italy and many other countries. But the US could not maintain this comfortable position in the early years of the 21st century. Although the USA became a big debtor country, but evidence suggests that even most of the developing countries which accumulated large sums of foreign currencies in the form of nation’s foreign currency reserves (FOREX), parked their reserves in the US. This parking of the dollars back in the US in the form of Federal bonds resulted in taking care of US’s high current account deficit. In other words, on the one hand the US pays nominal interest rate on the so parked reserves, it earns high interest rates on the FDI invested in other countries. In this way, even in the event of adverse current account deficit situation and huge debt, there was considerable demand for US dollars in the rest of the world. Thus those who believed that the current account deficit and higher inflation will have an adverse impact on the position of the US

6

dollar internationally, proved to be wrong. Nevertheless, the data on exchange rate variation of USD with Euro from 01-01-1995 to 01-01-2014 suggest that there was considerable appreciation of dollar vis-à-vis Euro during 2001 to 2003. At that time it appeared that these situations were going against dollar as a reserve currency, but it recovered fast. The data of exchange rate of USD/EUR from 1995 to 2014 are represented below in the form of a graph5.

Figure-4

Figure-5

1999-01-01

1999-10-01

2000-07-01

2001-04-01

2002-01-01

2002-10-01

2003-07-01

2004-04-01

2005-01-01

2005-10-01

2006-07-01

2007-04-01

2008-01-01

2008-10-01

2009-07-01

2010-04-01

2011-01-01

2011-10-01

2012-07-01

2013-04-01

2014-01-010.00000.20000.40000.60000.80001.00001.20001.40001.60001.8000

USD/EUR

Period

Valu

e

6

5 http://faxtop.com/en/historical-exchange-rates-graph-zoom.php? Downloaded on 31-08-2015.

6

U.S. / Euro Foreign Exchange RateDEXUSEUBoard of Governors of the Federal Reserve SystemH.10 Foreign Exchange RatesNot Seasonally AdjustedMonthlyAverageU.S. Dollars to One Euro1999-01-04 to 2014-05-092014-05-12 4:06 PM CDT

7

Moreover, the statistical analysis of the varying USD/EUR exchange rate from 1995 to 2014 yields as follows:-

Table-2N Minimum Maximum Mean Std. Deviation Variance

Statistic Statistic Statistic Statistic Statistic Statisticvalue 184 .8525 1.5759 1.221776 .1850112 .034Valid N (listwise)

184

It can be seen that the standard deviation and the variance of the foreign exchange rate are quite small. However, after recovery, if the same statistics of 2003 to 2014 is worked out, it will be as follows: --

Table-3Descriptive Statistics

N Minimum Maximum Mean Std. Deviation VarianceValue 136 1.0622 1.5759 1.314970 .1034486 .011Valid N (listwise) 136

It shows that the standard deviation and variance have fallen drastically. Moreover, the Federal Reserve never succumbs to the temptations or pressures to inflate away the US debt, the dollar continues its predominant position, although one school of thought believes that the huge US debt reflects it in negative light as the major vehicle currency of the World.

According to the Board of Governors’ US Federal Reserve’s published euro-dollar statistical series, the level of the euro started at USD 1.18 (for 1 Euro) in 1999, reached its historical minimum in October 2000 (USD 0.825) and its historical maximum in July 2008 (USD 1.599), when the US banking crisis started. This is evident from the above plot. Overall, the euro has experienced a relative appreciation versus dollar since its birth and in particular over the last 6 years. Exchange Rate Determination:

According to standard macroeconomic theory, the relative equilibrium level of two currencies is the result of short, medium and long term factors as follows:

In short term, under perfect substitutability between domestic and foreign assets and excluding the risk factor, the relative value of two currencies moves in tandem with the relative interest rate differentials until the expected investment returns in both countries is the same. This is called “interest rate parity” (IRP) condition (Jacob Frenkel and Richard Levich (1981)).The IRP condition implies that the expected return on domestic assets will equal the exchange rate-adjusted expected return on foreign currency assets. In such a situation the investors cannot earn arbitrage profits.

In medium term, the relative value of two countries’ currencies move in tandem with the current account balance positions (CAP). The country with a weaker current accounts balance position tends to have a weaker currency (Edwards,1989). The country with a current account deficit and with limited foreign currency reserves at its disposal may be forced by financial markets to depreciate its currency or alternatively, to have a sharp reduction in its domestic demand, through an internal devaluation. By contrast, the country with a current account surplus will tend to experiment with an appreciation of its currency (Krugman,(1979 and 1999)).

8

In the long term, however, the relative value of two currencies tends to reflect their inflation differentials. That is, a bundle of goods in a country should cost the same in another country after exchange rate differentials are accounted for. This is known as Absolute or relative Purchasing Power Parity condition (PPP). The country with higher inflation rates will see its currency to lose value and the country with lower inflation rates will see its currency to appreciate.The Absolute Purchasing Power Parity (APPP) is derived from the basic idea of the “law of one price”, which states that the “real” price of a good, once inflation has been taken into account, must be the same across all countries. APPP maintains that the exchange rate between two currencies should be identical to the ratio of their price levels, provided that goods in each country are freely tradable and the price index in both the countries refers to the same basket of goods.

The Relative Purchasing Power Parity (RPPP), however, refers to the change in the two countries’ expected inflation rates to the change in their exchange rates as inflation reduces the real purchasing power of a currency. The higher the inflation rate the lower the RPPP of the country.

The Interest Rate Parity (IRP) and the Purchasing Power Parity (PPP) are similar in the following sense of the terms: The RIP is expected to hold when there is no arbitrage opportunity in the international financial markets, while PPP is expected to hold when there are no arbitrage opportunities in the international goods and commodities markets. As financial assets adjust to new information more quickly than goods’ prices do, RIP theory works well in short run and PPP theory works well in the long run. Irving Fisher (1933) was the first economist to establish the theoretical relationship between inflation and the real interest rate. One problem with the PPP theory is that the quality of goods is hard to measure, but significant progress of this matter has been made recently (Horn,2008).

Besides these three drivers of exchange rate determination internationally, there are at least 3 other factors that investors are also concerned about. First, the quantum of the public debt as percentage of GDP of various countries matters. Countries with very large public debt relative to GDP are less attractive to foreign investors, because large public debt is paid back either through higher inflation or through financial repression which is often socially painful. In 2013, the general government consolidated debt in the euro area was 95% of GDP whereas in the US the public debt was to the tune of 104% of GDP. Second, the “terms of trade”, that is, the ratio between export prices and import prices matters as well. In a nutshell, the currency value falls when imports keep growing faster than exports and vice versa, i.e. when the current account position deteriorates. Finally, the relative economic growth of a country is also an important factor to decide whether to invest or not in a country.

2. Relative size of the country in terms of GDP

Another determinant of the foreign currency reserves is the relative size of the countries in terms of GDP. The following figures indicate the GDP per capita from 1980 to the projected figures of 2018 of various countries as compared to the United States. Professor Wendell Cox has used 2013 IMF economic statistical data to make comparison between US, Japan, EU, China and India. The data of 2011 of China have been adjusted for PPP.

In absolute terms also the GDP of US alone is more than the GDP of European Union countries taken together (Data from 2006 to 2013 are depicted in the following bar charts). Even the size of the emerging giant i.e. China’s GDP during the same period is also shown. It can be seen very clearly that the GDP of the US has been constantly been increasing and has constantly been more than the total GDP of the EU member countries taken together. Even when the financial crisis had hit the US in 2009, the GDP was still higher than that of the European Union.

Figure-6

9

Figure-7

10

The GDP of China was also far below that of the US during this period although it can be seen that the growth registered by China in GDP was quite high on an average and on annual basis being a fast growing economy.

Figure-8

Figure-9

It is amply clear from the above discussion that the use of Dollar and Euro (to some extent) as reserve currencies of various countries of the world is pre-dominant and the USD retains its position at number one with Euro as its potential competitor. Nevertheless, the emerging role of the Chinese currency cannot be completely ignored.

As the paper reviews a number of issues related to the use of currencies in international trade, more than one decade after the introduction of the euro and shortly after steps taken by the Chinese authorities to liberalize the use of the RMB in off-shore markets, trade is an important factor in establishing a currency as an international currency, notably by fulfilling the transaction/medium of exchange and unit of account motives of currency demand. A well prepared liberalization of currency use for international trade and foreign direct investment (FDI) transactions can even be helpful in achieving the international investment and reserve currency status of a currency.

11

While in the distant past the later was also linked to preponderance of a country in trade markets, it is now linked to the prevalence of the currency in international financial transactions, which supposes that the country in question engages at least partly in some liberalization of capital account transactions.

2. Network externalities or economies of scale and scopeThis paper shows theoretical and practical reasons explaining the current dominance of the US dollar and

the euro in the invoicing of international trade. There is little doubt, though, that in the medium-to-long term the RMB may become a major currency of settlement in international trade. This is not only the current direction of government policy but also that of the international financial and commodity markets, as evidenced by the rapid expansion of off-shore trade payments in Chinese currency. In the meantime, however, the US dollar and the euro are enjoying a near duopoly as settlement and invoicing currencies in international trade. The stability of this duopoly is enhanced by a number of factors recently highlighted by economic analysis: coalescing, " thick externalities" and scarcity of international currencies. These attributes of the dollar and the euro are useful to explain that, until such time that RMB payments match at least the share of China in global trade, the US dollar and the euro will remain the main currencies in the invoicing and payment in the international trade both in currency as well as in the commodity markets. Blinder (1996) offers a good definition after blending all the four characteristics which encompass the three classical functions of money (a medium of exchange, a unit of account, and store of value). According to him an international currency is the one which constitutes a preponderant/major share of all the official reserves of various currencies in the Central Banks; a currency that can be used "hand-to-hand" in foreign countries; a currency in which a disproportionate share of the total international trade is denominated; and a dominant currency in the various international financial markets.

An international money, like domestic money, also derives its value because others are using it. It is a classic instance of network externalities. In this sense, the path-dependent historical equilibrium is more important than the intrinsic characteristics of a currency. There is, therefore, a strong inertial bias in favour of using whatever currency has been the international currency in the past.Inertia and Conclusion

Krugman (1984) showed how there can be multiple equilibria in use of an international currency, developing ideas of some earlier authors such as Kindleberger (1981), McKinnon (1979) and Swoboda (1969). The implication is that small changes in the determinants will not produce corresponding changes in the reserve currency numbers, at least not in the short run. Even minimal changes will show up only after a long lag. As noted, the pound remained an important international currency even after the United Kingdom lost its position as an economic superpower early in the 20th. century. In the present context, the inertial bias favours the continued central role of the dollar. Also, as already noted, economies of scale suggest that, even in the long run, measures of international currency use may not be linear in the determinants. There may be a tipping phenomenon when one currency passes another.

Another aspect of the network externalities is economies of scope. An individual (exporter, importer, borrower, lender or currency trader) is more likely to use a given currency in his or her transactions if everyone else is doing so. If a currency is widely used to invoice trade, it is more likely to be used to invoice financial transactions as well. If it is more widely used in financial transactions, it is more likely to be a vehicle currency in foreign exchange trading. If it is used as a vehicle currency, it is more likely to be used as a currency to which smaller countries peg.

12

Bibliography:1. May 2003, WP/03/95, IMF Working Paper, Jorge Ivan Canales-Kriljenko, “Foreign Exchange

Intervention in Developing and Transition Economies”.2. Josh Zoffer, Harvard International Review, Summer 2012, “Future of Dollar Hegemony” The Dollar’s

Role After the Euro Crisis.3. Dr. Navneet Gera, Prof Som Deo and Anoop Pandey, Synergy(Jan, 2011), Vol.IX No. 1, “Historic

Background of Euro Currency and its Race to Catch US Dollar in International Financial Market”.4. Policy Brief Series Issue 3, Nov 2011, Ramkishen S. Rajan and Sasidaran Gopalan, Lee Kuan Yew

School of Public Policy, National University of Singapore, “International Currency Competition: Are There Alternatives to the US Dollar?”.

5. May 2012, Menzie D Chinn, University of Wisconsin and NBER, “A Note on Reserve Currencies with Special Reference to the G-20 Countries”.

6. International Journal of Economics and Finance; Vol.6, No. 1; 2014, by Latife Ghalayini, Canadian Centre of Science and Education, “Modeling and Forecasting the US Dollar/Euro Exchange Rate”.

7. Economic Policy, April 2002, Harald Hau, William Killeen and Michael Moore, “Euro’s Forex Role: How has the euro changed the foreign exchange market?”.

8. June 2005, SCCIE Working Paper #06-2, Santa Cruz Center for International Economics, Menzie Chinn, University of Wisconsin and NBER and Jeffrey Frankel, Harvard University and NBER, “Will the Euro Eventually Surpass the Dollar As Leading International Reserve Currency?”.

9. April 2008, Menzie D. Chinn and Jeffrey A. Frankel, “The Euro May over the Next 15 Years Surpass the Dollar as Leading International Currency”.

13