The Effects of Emu on the Dollar and the Yen as International Currencies
International Journal of Business, Vol. 3, No. 1, 1998
Posted: 7 Apr 1998
This paper estimates demand functions for international reserves and projects the effects of EMU on the level and the composition of international reserves both of the European Central Bank and of non-EMU central banks. Furthermore, this paper investigates possible shifts in the currency composition of international bonds and bank deposits in private portfolios. Using different scenarios for the ultimate country composition of EMU, the analysis points to a sizable reduction in the level of international reserves in EMU and to a reduction in the demand for dollar assets both within and outside EMU. However, these changes require a high degree of price stability within the EMU and are expected to take place only gradually so that no immediate drastic effect on international financial markets may result from these shifts.
JEL Classification: F31, F36
Suggested Citation: Suggested Citation