Coppola, Antonio; Krishnamurthy, Arvind; Xu, Chenzi - National Bureau of Economic Research - 2023
We provide a liquidity-based theory for the dominant use of the US dollar as the unit of denomination in global debt … endogenously raises its liquidity, incentivizing more issuance. We rationalize features of the current dollar …-dominant international financial architecture and relate our theory to historical experiences, such as the prominence of the Dutch florin and …