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Barry Eichengreen

7 May 2012
WORKING PAPER SERIES - No. 1433
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Abstract
This paper offers new evidence on the emergence of the dollar as the leading international currency, focusing on its role as currency of denomination in global bond markets. We show that the dollar overtook sterling much earlier than commonly supposed, as early as in 1929. Financial market development appears to have been the main factor helping the dollar to surmount sterling
JEL Code
F30 : International Economics→International Finance→General
N20 : Economic History→Financial Markets and Institutions→General, International, or Comparative
17 September 2012
WORKING PAPER SERIES - No. 1466
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Abstract
We analyze persistence in patterns of bilateral financial investment using data on US investors’ holdings of foreign bonds. We document a “history effect” in which the pattern of holdings seven decades ago continues to influence holdings today. 10 to 15% of the cross-country variation in US investors’ foreign bond holdings is explained by holdings 70 years ago, plausibly reflecting fixed costs of market entry and exit. This effect is twice as large for bonds denominated in currencies other than the dollar, suggesting the existence of even higher fixed costs of initiating US foreign investment in currencies other than the dollar. Our findings point to history and path dependence as key sources of financial market segmentation.
JEL Code
F30 : International Economics→International Finance→General
N20 : Economic History→Financial Markets and Institutions→General, International, or Comparative
12 March 2014
WORKING PAPER SERIES - No. 1651
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Abstract
Conventional wisdom has it that network effects are strong in markets for homogeneous goods, leading to the dominance of one settlement currency in such markets. The alleged dominance of the dollar in global oil markets is said to epitomize this phenomenon. We question this presumption with evidence for earlier periods showing that several national currencies have simultaneously played substantial roles in global oil markets. European oil import payments before and after World War II were split between the dollar and non-dollar currencies, mainly sterling. Differences in use of the dollar across countries were associated with trade linkages with the United States and the size of the importing country. That several national currencies could simultaneously play a role in international oil settlements suggests that a shift from the current dollar-based system toward a multi-polar system in the period ahead is not impossible.
JEL Code
F30 : International Economics→International Finance→General
N20 : Economic History→Financial Markets and Institutions→General, International, or Comparative
2 July 2014
WORKING PAPER SERIES - No. 1686
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Abstract
This paper reconstructs the forgotten history of mutual assistance among Reserve Banks in the early years of the Federal Reserve System. We use data on accommodation operations by the 12 Reserve Banks between 1913 and 1960 which enabled them to mutualise their gold reserves in emergency situations. Gold reserve sharing was especially important in response to liquidity crises and bank runs. Cooperation among reserve banks was essential for the cohesion and stability of the US monetary union. But fortunes could change quickly, with emergency recipients of gold turning into providers. Because regional imbalances did not grow endlessly, instead narrowing when region-specific liquidity shocks subsided, mutual assistance created only limited tensions. These findings speak to the current debate over TARGET2 balances in Europe.
JEL Code
F30 : International Economics→International Finance→General
N20 : Economic History→Financial Markets and Institutions→General, International, or Comparative
13 August 2014
WORKING PAPER SERIES - No. 1715
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Abstract
We investigate whether the role of national currencies as international reserves was fundamentally altered by the shift from fixed to flexible exchange rates (what we call the
JEL Code
F30 : International Economics→International Finance→General
N20 : Economic History→Financial Markets and Institutions→General, International, or Comparative
30 March 2016
WORKING PAPER SERIES - No. 1889
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Abstract
We analyze the impact of technology on production and trade in services, focusing on the foreign exchange market. We identify exogenous technological changes by the connection of countries to submarine fiber-optic cables used for electronic trading, but which were not laid for purposes related to the foreign exchange market. We estimate the impact of cable connections on the share of offshore foreign exchange transactions. Cable connections between local markets and matching servers in the major financial centers lower the fixed costs of trading currencies and increase the share of currency trades occurring onshore. At the same time, however, they attenuate the effect of standard spatial frictions such as distance, local market liquidity, and restrictive regulations that otherwise prevent transactions from moving to the major financial centers. Our estimates suggest that the second effect dominates. Technology dampens the impact of spatial frictions by up to 80 percent and increases, in net terms, the share of offshore trading by 21 percentage points. Technology also has economically important implications for the distribution of foreign exchange transactions across financial centers, boosting the share in global turnover of London, the world
JEL Code
F30 : International Economics→International Finance→General
22 February 2019
WORKING PAPER SERIES - No. 2246
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Abstract
We analyze the role of economic and security considerations in bilateral trade agreements. We use the pre-World War I period to test whether trade agreements are governed by pecuniary factors, such as distance and other frictions measured by gravity covariates, or by geopolitical factors. While there is support for both hypotheses, we find that defense pacts boost the probability of trade agreements by as much as 20 percentage points. Our estimates imply that were the U.S. to alienate its geopolitical allies, the likelihood and benefits of successful bilateral agreements would fall significantly. Trade creation from an agreement between the U.S. and E.U. countries would decline by about 0.6 percent of total U.S. exports.
JEL Code
F13 : International Economics→Trade→Trade Policy, International Trade Organizations
N20 : Economic History→Financial Markets and Institutions→General, International, or Comparative