2010 | 239 The Mechanism of Functioning of EMU Euro Zone Enlargement - the New Members' Perspective | 5--14
The Euro as a Reserve Currency
There has been an unusual accumulation of foreign exchange reserves in recent years. Central banks have to diversify their reserves away from the US dollar, especially towards the euro. The same situation is in a private sector, where investors reduce the share of dollar denominated assets. This process has progressed gradually, but it is possible that the euro's role as a reserve currency will continue to increase. The purpose of this article is to define an international currency and its functions, first of all as a reserve currency. Furthermore, this paper shows factors which, influence on country's choices between specific currencies as their reserve assets. The US dollar holdings position is still much stronger than the euro's one, and the aim of this article is to present how great this difference is. (original abstract)
- 1. Annual Report 2009, Appendix I: International reserves, International Monetary Fund, Washington 2009.
- 2. Bertuch-Samuels A., Ramlogan P., The Euro: Ever More Global, "Finance and Development" No 1, Volume 44, International Monetary Fund, Washington 2007.
- 3. De facto classification of Exchange rate regimes and monetary policy framework. International Monetary Fund, Washington 2008 (www.imf.org).
- 4. De la Dehesa G., Will the Euro Ever Replace The US Dollar as the Dominant Global Currency? Working Paper 54/2009, Elcano Royal Institute, Madrid 2009.
- 5. Eichengreen В., The euro as a reserve currency, November 1997. (www.econ.berk.eley. edu/~eichengr/research/mantokyo.pdf)
- 6. Feldstein M., Self-protection for emerging market economies, NBER Working Paper Series, No 6907, Cambridge 1999.
- 7. Galati G., Wooldridge P., The euro as a reserve currency: a challenge to the pre-eminence of the US dollar? BIS Working Papers No 218, Bank for International Settlements, Basel 2006.
- 8. Hartman P., Currency competition and foreign exchange market, Cambridge University Press, Cambridge 1998.
- 9. Oręziak L., Międzynarodowa pozycja euro NBP,Warszawa, 2005 (www.nbportal.pl/library/pub_ auto_B_0002/KAT_B2005 .PDF).
- 10. Papaioannou E., Porters R., The euro as an international currency vis-à-vis the dollar, www.euro50.org/2007/rome/Papaioannou.pdf
- 11. Papaioannou E., Porters R., The international role of the euro: a status report, Economic Papers 317, European Commission, Brussels 2008.
- 12. Papaioannou E., Porters R., Siourounis G., Optimal currency shares in international reserves. The impact of the euro and the prospects for the dollar, Working Papers No 694, European Central Bank, Frankfurt am Main 2006.
- 13. The international role of the euro, European Central Bank, Frankfurt am Main 2008.