The widespread adoption of the dollar as a global currency has long been thought of as a source of "exorbitant privilege" for the United States, a term coined in the 1960s by France's then Finance Minister Valéry Giscard d'Estaing. Having a large share of trade invoiced in dollars protects U.S. exporters and importers from exchange rate risk. And insatiable global demand for U.S. Treasuries enables America to service its more than $30 trillion in federal debt at favorable interest rates.
Barry Eichengreen Exorbitant Privilege Pdf Download
Does the dollar's widespread use abroad confer an "exorbitant privilege" upon the United States as Giscard d'Estaing claimed? Most economists agree that it has its benefits, though not many would say they qualify as exorbitant.
There is another benefit that flows to the United States from the widespread use of the US dollar for international trade and investment. The United States typically imports and borrows in its own currency and so is less exposed to the exchange rate changing the value of its imports and external liabilities, facilitating its ability to borrow internationally. The ability of the United States to borrow in its own currency was famously dubbed an "exorbitant privilege" by a French finance minister in the 1960s. This exorbitant privilege is considered one of the main benefits of "reserve currency" status, but it has little to do with the official reserves held by foreign central banks. It is a function of the size and depth of US dollar capital markets and the desire of foreigners to invest in US dollar assets. 2ff7e9595c
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