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How economic crises have strengthened the role of the United States dollar and its implications for developing economies

Esteban Pérez Caldentey

Chapter 2 in Central Banking, Monetary Policy and the Political Economy of Dollarization, 2025, pp 18-47 from Edward Elgar Publishing

Abstract: This chapter argues that the most recent crisis (the Global Financial Crisis (2008–2009) and the COVID-19 pandemic (2020)) have strengthened the role of the United States dollar and of the Federal Reserve as the pivots of the global financial system. This is a form of dollarization. This was in part the unintended result of the failure of the global financial architecture to respond to both crises. The dollar has increased its importance as an international medium of exchange, maintained its strength as a store of value, and reinforced its role as the world's unit of account. This has important financial implications for the United States and for those countries, particularly developing countries, that are anchored to the dollar. These implications are brought to the fore by analyzing the components of the external balance sheets for the United States and for developing countries. The analysis is placed within the context of some of the changes that have occurred in the financial system and in the composition of international financial flows since the end of the Global Financial Crisis.

Keywords: Developing countries; Dollarization; External balance sheets; International capital markets; United States dollar (search for similar items in EconPapers)
Date: 2025
ISBN: 9781803925325
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