Mapping Global Debt: A New Measure of Currency Dominance and Uncertainty Shock Effects

Agustin S. Benetrix () and Beren Demirolmez ()
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Agustin S. Benetrix: Department of Economics, Trinity College Dublin
Beren Demirolmez: European Stability Mechanism

No tep0925, Economic Papers from Trinity College Dublin, Economics Department

Abstract: We study currency dominance in global portfolio debt, focusing on the US dollar and the euro. Our key contribution is the Dominance Ratio (DR), a new indicator that refines the measurement of currency internationalisation by excluding debt held by the regions issuing those currencies (the US for dollars, the Euro Area for euros). Using the DR, we find that the internationalisation of the dollar and euro evolves slowly and remains unaffected by short-term uncertainty shocks. However, these shocks affect the geographical distribution of dollar and euro debt. Trade policy uncertainty reduces euro concentration, increasing relative dollar concentration, whilst geopolitical risk shocks diminish both absolute and relative dollar concentrations, particularly when adjusted for currency scale using the DR.

Keywords: currency dominance; dollar; euro; portfolio debt; uncertainty shocks (search for similar items in EconPapers)
JEL-codes: E4 F21 F34 F41 F51 G1 (search for similar items in EconPapers)
Pages: 74 pages
Date: 2025-09
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Persistent link: https://EconPapers.repec.org/RePEc:tcd:tcduee:tep1025

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