Exchange Arrangements Entering the 21st Century: Which Anchor Will Hold?

Ethan Ilzetzki, Carmen Reinhart and Kenneth Rogoff

No 23134, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper provides a comprehensive history of anchor or reference currencies, exchange rate arrangements, and a new measure of foreign exchange restrictions for 194 countries and territories over 1946-2016. We find that the often-cited post-Bretton Woods transition from fixed to flexible arrangements is overstated; regimes with limited flexibility remain in the majority. Our central finding is that the US dollar scores (by a wide margin) as the world’s dominant anchor currency and, by some metrics, its use is far wider today than 70 years ago. In contrast, the global role of the euro appears to have stalled in recent years. While the incidence of capital account restrictions has been trending lower for decades, an important wave toward capital market integration dates as recently as the mid-1990s. We suggest that record accumulation of reserves post 2002 has much to do with many countries’ desire to stabilize exchange rates in an environment of markedly greater capital mobility. Indeed, the continuing desire to manage exchange rates despite increased capital mobility post-2003 may be a key factor underpinning the modern-day Triffin dilemma that some have recently pointed to.

JEL-codes: E50 F3 F4 N2 (search for similar items in EconPapers)
Date: 2017-02
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mac and nep-opm
Note: IFM ME
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Citations: View citations in EconPapers (556)

Published as Ethan Ilzetzki & Carmen M Reinhart & Kenneth S Rogoff, 2019. "Exchange Arrangements Entering the Twenty-First Century: Which Anchor will Hold?," The Quarterly Journal of Economics, Oxford University Press, vol. 134(2), pages 599-646.

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Journal Article: Exchange Arrangements Entering the Twenty-First Century: Which Anchor will Hold? (2019)
Working Paper: Exchange Arrangements Entering the 21st Century: Which Anchor Will Hold? (2017)
Working Paper: Exchange Arrangements Entering the 21st Century: Which Anchor Will Hold? (2017)
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