US Sanctions Reinforce the Dollar’s Dominance

Michael Dooley, David Folkerts-Landau and Peter Garber

No 29943, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Recent sanctions on the use of Russia’s international reserve assets seem likely to reduce the appeal of US dollar reserves as a “shock absorber” for international payments. But international reserves are also a means to reassure foreign investors that problematic countries will not confiscate their investments. The “collateral” motive for holding dollar reserves has been enhanced by the demonstration that the United States is willing and able to sanction misbehavior. Geopolitically risky countries now more than ever need to reassure foreign investors that their investments are safe from expropriation. We conclude that recent events will strengthen the role of the dollar as the key international reserve currency.

JEL-codes: F3 F33 F51 (search for similar items in EconPapers)
Date: 2022-04
New Economics Papers: this item is included in nep-cba, nep-cis and nep-mon
Note: DEV IFM
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Citations: View citations in EconPapers (6)

Published as Michael P Dooley & David Folkerts Landau & Peter M Garber, 2022. "US Sanctions Reinforce the Dollar’s Dominance," Open Economies Review, vol 33(5), pages 817-823.

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