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The Dollar’s Imperial Circle

Author

Listed:
  • Ozge Akinci

    (Federal Reserve Bank of New York)

  • Gianluca Benigno

    (HEC-University of Lausanne)

  • Serra Pelin

    (University of California at Berkeley)

  • Jon Turek

    (JST Advisors)

Abstract

In this paper, we highlight a new channel through which dollar fluctuations can become a self-fulfilling pro-cyclical force. We call this mechanism Imperial Circle as it makes the dollar the dominant macroeconomic variable in the context of the current international monetary system. At the core of it, there is a fundamental asymmetry between the shrinking exposure of the “real” US economy to global developments versus the growing global role of the US dollar. Dollar appreciation leads to a decline in global economic activity, which in turn benefits, in relative terms, the dollar itself, reinforcing the initial appreciation and its effects.

Suggested Citation

  • Ozge Akinci & Gianluca Benigno & Serra Pelin & Jon Turek, 2024. "The Dollar’s Imperial Circle," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 72(2), pages 653-700, June.
    • Handle: RePEc:pal:imfecr:v:72:y:2024:i:2:d:10.1057_s41308-023-00235-6
    DOI: 10.1057/s41308-023-00235-6
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    Cited by:

    1. Schwartz, Herman M., 2024. "Triffin reloaded: The matrix of contradictions around global quasi-state money," MPIfG Discussion Paper 24/3, Max Planck Institute for the Study of Societies.

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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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