Does The Euro Have A Chance to Challenge The Dollar

Idil Goksel

No 401, Working Papers from Izmir University of Economics

Abstract: The dollar has been the dominant currency since the World War II. Will the euro ever be able to challenge the dollar? In order to understand the chance of the euro against the dollar some comparisons are made between them. Starting with the main economic indicators to their roles in the international trade, their power and potential in many economical aspects are tried to be figured out and compared. Furthermore, their elasticities, their roles in the international financial markets, current account and trade balance of the the two parts are discussed. An empirical study on international bonds and notes is made by using the attraction model. All of the analyses made in this research show us the potential of the euro to become an international currency. Although the dollar has still some advantages over the euro, a bipolar currency regime dominated by Europe and the United States may replace the dollar-centered system that has continued for most of this century.

Pages: 29 pages
Date: 2004-08
New Economics Papers: this item is included in nep-eec and nep-mon
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