Some recent items: papers by Chinn, Frankel and Ito and Kamin and Sobel; talk by Mark Copelovitch<\/a> on Tuesday.<\/p>\n By Chinn, Frankel, and Ito (2024)<\/a>, updating Chinn and Frankel (2007<\/a>, 2008<\/a>), on the central bank reserve aspect:<\/p>\n Figure 1:<\/strong> Central bank holdings of foreign exchange, by currency. 2023 value is for Q3. Source: Chinn, Frankel, Ito (February 2024)<\/a>.<\/em><\/p>\n From Kamin and Sobel, \u201cDollar Dominance Is Here to Stay for the Foreseeable Future\u2013The Real Issue for the Global Economy Is How and Why\u201d<\/a>.<\/p>\n Below is a list of some of the sanctions imposed by the US and other G7 countries on Russia since it invaded Ukraine:<\/p>\n Not all of these sanctions depend on the dominance of the dollar in the international financial system, but many of them do. In particular, actions that cut Russia off from dollar transactions or freeze its dollar assets can exert material harm on its economy, and are a helpful complement to other US and Western diplomatic and strategic instruments.<\/p>\n Some critics have complained that such a \u201cweaponization\u201d of the dollar by the United States risks diminishing the dollar\u2019s dominance by pushing countries to use other currencies in order to evade the sanctions. Financial sanctions have increasingly been used by Administrations, particularly in the wake of 9\/11. Policymakers view financial sanctions as a strong and useful \u2018stick\u2019, short of warfare, that complements the \u2018carrot\u2019 of diplomacy. Recourse to excessive or abusive use of financial sanctions could accelerate foreign propensity to use alternatives to dollars \u2013 for example, Europe\u2019s effort to build an alternative payments mechanism in the wake of US abandonment of the Joint Comprehensive Plan of Action against Iran.<\/p>\n But again, America\u2019s extensive alliance structures significantly mitigate such a development. Moreover, when financial sanctions are imposed multilaterally in coordination with our allies rather than pursued unilaterally, and applied with restraint and only in response to egregious actions and in furtherance of strategic objectives, any adverse impact on the dollar\u2019s financing and reserve role should be substantially minimized. In contrast, we would argue that excessive US use, if not abuse, of financial sanctions will weaken the effectiveness and ability to use this tool in the future.<\/p>\n In short, concerns about the use of financial sanctions significantly hurting the dollar\u2019s stature are overstated. First, as noted above, only a small fraction of countries are likely to be motivated by sanctions to seek alternatives to the dollar. Most advanced economies have close ties with the United States, either through political\/military arrangements such as NATO, through largely economic arrangements such as the G7 or the OECD, or through shared values such as respect for democratic norms. Many emerging markets and developing countries also have close political ties with the United States, even if some of them choose to also maintain relations with countries that have tense relations with the \u201cWest\u201d. Finally, for all of these countries, the enormity of the US economy as a market for goods, services, and investment cannot be underestimated. Very few countries would be prepared to run the risk of losing significant access to the US market. These considerations both buttress the effectiveness of US sanctions and ensure that use of these sanctions will not jeopardize the dominance of the dollar.<\/p>\n<\/blockquote>\n Mark Sobel on video<\/a> at UW Madison, back in April.<\/p>\n My colleague Mark Copelovitch<\/a> (on leave, at American Academy in Berlin<\/a>) has a talk on the dollar\u2019s role on Tuesday<\/a>.<\/p>\n The Atlantic Council has a \u201cDollar Dominance Monitor\u201d<\/a> if you want to see up-to-date figures. Other views:\u00a0\u00a0 CFR<\/a> in July,\u00a0Eswar Prasad<\/a> in 2022. Jeffrey Frankel on \u201cDollar Rivals\u201d (2023)<\/a> .\u00a0JP Morgan on dedollarization<\/a> (August). My January look at BRICS dollar vs. RMB holdings<\/a>.\u00a0 Friendshoring in reserves, from OMFIF (August).<\/a><\/p>\n The ECB\u2019s the international role of the euro<\/a> (June).<\/p>\n PIIE\u2019s \u201cFloating at 50\u201d conference, April 2023.<\/a><\/p>\n Senator Theoden<\/a>, on the use of economic sanctions as a threat to dollar\u2019s role as an international currency<\/a>. (Senator Theoden on Navalny\u2019s death: null set (as of 3pm CT today)).<\/p>\n \u00a0<\/p>\n<\/p><\/div>\n![\"\"](\"https:\/\/econbrowser.com\/wp-content\/uploads\/2024\/02\/fxholdings_long1.png\")
<\/a><\/p>\n\n
\n