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Prospects for the Euro: Will Reserve Holdings Shift in Its Favour?

Author

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  • Batavia, Bala
  • Nandakumar, P.
  • Wague, Cheick

Abstract

The determinants of Central Bank reserve holdings of major hard currencies are analyzed for the pre-Euro and the post-Euro periods. Real economic variables, financial variables, and developments in key Asian markets which are likely to possess greater clout in the future are used in the estimation process. Developments in oil markets are also considered while evaluating the future global importance of the Euro. Simulations are undertaken to trace possible future scenarios for the Euro and the Dollar. The simulations indicate that a rise in Asian emerging market share of world output will work towards preserving Dollar dominance.

Suggested Citation

  • Batavia, Bala & Nandakumar, P. & Wague, Cheick, 2008. "Prospects for the Euro: Will Reserve Holdings Shift in Its Favour?," The Journal of Economic Asymmetries, Elsevier, vol. 5(1), pages 79-91.
    • Handle: RePEc:eee:joecas:v:5:y:2008:i:1:p:79-91
    DOI: 10.1016/j.jeca.2008.01.007
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    References listed on IDEAS

    as
    1. Menzie Chinn & Jeffrey A. Frankel, 2007. "Will the Euro Eventually Surpass the Dollar as Leading International Reserve Currency?," NBER Chapters, in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 283-338, National Bureau of Economic Research, Inc.
    2. Eichengreen, Barry & Mathieson, Donald J., "undated". "The Currency Composition of Foreign Exchange Reserves Retrospect and Prospect," WIDER Working Papers 295509, United Nations University, World Institute for Development Economic Research (UNU-WIDER).
    3. John F. O. Bilson & Richard C. Marston, 1984. "Exchange Rate Theory and Practice," NBER Books, National Bureau of Economic Research, Inc, number bils84-1.
    4. Grassman, Sven, 1973. "A fundamental symmetry in international payment patterns," Journal of International Economics, Elsevier, vol. 3(2), pages 105-116, May.
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    More about this item

    Keywords

    F02; F36; F37; Euro Dollar reserve holdings simulations;
    All these keywords.

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications

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