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Can the Euro Ever Challenge the Dollar?

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  • Benjamin J. Cohen

Abstract

Can the euro ever challenge the dollar as an international currency? This article argues that Europe's new money is fated to remain a distant second to America's greenback, for four reasons. First is the persistent inertia of monetary behaviour, which will inhibit any rapid switch to the euro. Second is the cost of doing business in euros, which is unlikely to decline below transactions costs for the greenback. Third is an anti-growth bias built into EMU, which will limit returns on euro-denominated assets. And fourth is the ambiguous governance structure of EMU, which sows doubt among prospective euro users. Copyright Blackwell Publishing Ltd 2003.

Suggested Citation

  • Benjamin J. Cohen, 2003. "Can the Euro Ever Challenge the Dollar?," Journal of Common Market Studies, Wiley Blackwell, vol. 41, pages 575-595, September.
    • Handle: RePEc:bla:jcmkts:v:41:y:2003:i::p:575-595
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    References listed on IDEAS

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    1. Hartmann,Philipp, 2007. "Currency Competition and Foreign Exchange Markets," Cambridge Books, Cambridge University Press, number 9780521046930, November.
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    Cited by:

    1. Gabriele Galati & Philip Wooldridge, 2009. "The euro as a reserve currency: a challenge to the pre-eminence of the US dollar?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 14(1), pages 1-23.
    2. Csaba, László, 2006. "A stabilitási és növekedési egyezmény új politikai gazdaságtanáról [On the new political economy of the Stability and Growth Pact]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(1), pages 1-30.
    3. Juneja, Januj, 2017. "How Germany benefits the most from its Eurozone membership," Research in International Business and Finance, Elsevier, vol. 42(C), pages 1074-1088.
    4. Carla Norrlof & Simon Reich, 2015. "American and Chinese leadership during the global financial crisis: Testing Kindleberger’s stabilization functions," International Area Studies Review, Center for International Area Studies, Hankuk University of Foreign Studies, vol. 18(3), pages 227-250, September.
    5. Soesmanto, Tommy & Selvanathan, Eliyathamby A. & Selvanathan, Saroja, 2015. "Analysis of the management of currency composition of foreign exchange reserves in Australia," Economic Analysis and Policy, Elsevier, vol. 47(C), pages 82-89.
    6. Benjamin J. Cohen, 2009. "Dollar Dominance, Euro Aspirations: Recipe for Discord?," Journal of Common Market Studies, Wiley Blackwell, vol. 47, pages 741-766, September.
    7. C. Randall Henning, 2006. "The External Policy of the Euro Area: Organizing for Foreign Exchange Intervention," Working Paper Series WP06-4, Peterson Institute for International Economics.
    8. Cohen, Benjamin J., 2014. "Will History Repeat Itself? Lessons for the Yuan," ADBI Working Papers 453, Asian Development Bank Institute.
    9. Pompeo Della Posta, 2005. "Fundamentals, International Role of Euro and 'Framing' of Expectations: What are the Determinants of the Dollar/Euro Exchange Rate?," Working Papers de Economia (Economics Working Papers) 24, Departamento de Economia, Gestão e Engenharia Industrial, Universidade de Aveiro.
    10. Subacchi, Paola, 2013. "Expanding Beyond Borders: The Yen and the Yuan," ADBI Working Papers 450, Asian Development Bank Institute.
    11. Benjamin J. Cohen, 2009. "Dollar Dominance, Euro Aspirations: Recipe for Discord?," Journal of Common Market Studies, Wiley Blackwell, vol. 47(4), pages 741-766, September.

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