Can the Euro Ever Challenge the Dollar?

Benjamin J. Cohen

Journal of Common Market Studies, 2003, vol. 41, issue 4, 575-595

Abstract: Can the euro ever challenge the dollar as an international currency? This article argues that Europe's new money is fated to remain a distant second to America's greenback, for four reasons. First is the persistent inertia of monetary behaviour, which will inhibit any rapid switch to the euro. Second is the cost of doing business in euros, which is unlikely to decline below transactions costs for the greenback. Third is an anti‐growth bias built into EMU, which will limit returns on euro‐denominated assets. And fourth is the ambiguous governance structure of EMU, which sows doubt among prospective euro users.

Date: 2003
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