The U. S. Balance of Payments and the International Role of the Dollar

The U. S. Balance of Payments and the International Role of the Dollar

The U. S. Balance of Payments and the International Role of the Dollar

The U. S. Balance of Payments and the International Role of the Dollar

Excerpt

The purpose of this study is to examine the behavior of the U.S. balance of payments in relation to the role of the dollar as an international currency and to explore the implications for U.S. international financial policies. Specifically we shall be concerned with the following questions: (1) How should a U.S. balance-of-payments deficit or surplus be defined in the light of the special role of the dollar in the international community? (2) What has been the behavior of foreign holdings of dollars (foreign liquid dollar assets) over the past decade? (3) What factors have influenced the demand for liquid dollar assets by foreign commercial banks, foreign central banks and other official agencies, and private firms and individuals? (4) How has the Eurodollar market affected the supply of and demand for dollars held outside the United States, and what is the relationship between Eurodollar transactions and the U.S. balance of payments? (5) What light does the analysis of the foregoing questions throw on U.S. international financial policies and the future international role of the dollar?

Although these broad questions are interrelated, each of the five chapters of this study singles out one of them for analysis. The first chapter reviews the approaches of the U.S. government and of independent scholars to the concept of U.S. balance-of-payments equilibrium and to the posture of the United States in the international financial community. Since the definition of deficit or surplus influences governmental decisions relating to interest rate policy . . .

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