Oil Currency and the Dollar Standard: A Simple Analytical Model of an International Trade Currency

Michael Devereux, Kang Shi () and Juanyi Xu

Journal of Money, Credit and Banking, 2010, vol. 42, issue 4, 521-550

Abstract: The U.S. dollar is the central reference currency for international trade pricing and the main invoicing currency for primary commodities. This paper links these two observations within a stylized theoretical framework, and shows how to obtain a quantitative estimate of the gain to the U.S. economy when the dollar is a reference currency. With dollar invoicing of primary commodities, U.S. firms bear less exchange rate risk than foreign firms. This asymmetry leads to a dollar standard in international goods pricing. We then derive a simple analytical formula to calculate the gains and find that they are extremely small.

Date: 2010
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https://doi.org/10.1111/j.1538-4616.2010.00298.x

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Journal Article: Oil Currency and the Dollar Standard: A Simple Analytical Model of an International Trade Currency (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:42:y:2010:i:4:p:521-550

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