This paper explores the impact of the US dollar dominance on monetary and exchange rate policies in 51 advanced and developing countries from 1999 to 2021. We introduce a global exposure index to measure countries’ dependence on the US dollar. Our study reveals that the dominant currency framework creates a global monetary cycle driven by the US dollar, exposing non-U.S. economies to the U.S. monetary policy. However, we show that countries can reduce their exposure to the U.S. monetary policy by accumulating reserves and intervening in foreign exchange.
Author: | Vanessa Olakemi, Dovonou |
Volume: | 2023.05 |
Publisher: | INFER |
Year: | 2023 |
No. of pages: | 26 |
Category: |