The Dollar’s Imperial Circle
In this paper, we highlight a new channel through which dollar fluctuations can become a self-fulfilling pro-cyclical force. We call this mechanism Imperial Circle as it makes the dollar the dominant macroeconomic variable in the context of the current international monetary system. At the core of i...
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| Veröffentlicht in: | IMF economic review 2024-06, Vol.72 (2), p.653-700 |
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| creator | Akinci, Ozge Benigno, Gianluca Pelin, Serra Turek, Jon |
| description | In this paper, we highlight a new channel through which dollar fluctuations can become a self-fulfilling pro-cyclical force. We call this mechanism Imperial Circle as it makes the dollar the dominant macroeconomic variable in the context of the current international monetary system. At the core of it, there is a fundamental asymmetry between the shrinking exposure of the “real” US economy to global developments versus the growing global role of the US dollar. Dollar appreciation leads to a decline in global economic activity, which in turn benefits, in relative terms, the dollar itself, reinforcing the initial appreciation and its effects. |
| doi_str_mv | 10.1057/s41308-023-00235-6 |
| format | Article |
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| language | eng |
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| source | PAIS Index; SpringerLink |
| subjects | American dollar Asymmetry Capital Markets Consumption Dollar (United States) Economic activity Economic Policy Economics Economics and Finance Emerging markets Foreign exchange Global economy Hypotheses International Economics International finance Internationales Währungssystem Macroeconomics Macroeconomics/Monetary Economics//Financial Economics Manufacturing Monetary policy Prices and rates Research Article Reservewährung US-Dollar Welt Working capital Zyklisches Verhalten |
| title | The Dollar’s Imperial Circle |
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